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Land and Environment : Agribusiness Assoc. of Australia
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Agribusiness Review - Vol. 6 - 1998

Paper 6
ISSN 1442-6951


EAAU's Reporting of Agriculture and Food Distribution in Asia's Megamarket: Does it Really Meet the Needs of Business, the Government and Academics? *

Paul Riethmuller, Senior Lecturer
Department of Economics
University of Queensland, St Lucia

* I am grateful to Professor T. Odagiri (Tokyo University) and Professor A. Takizawa (Meiji University) for their comments on this paper, but they are exonerated from any of the errors. The comments of two anonymous referees are also appreciated. The research for this paper was completed while I was a Visiting Professor in the Department of Agricultural and Resource Economics, University of Tokyo.

Abstract

Australia's share of Japan's food and live animal import market has been pressured by competition from the USA, China and the ASEAN countries. Questions have been asked about Australia's approach to the Japanese market and level of understanding of its agricultural market and its distribution system. The 1997 report by the East Asia Analytical Unit (EAAU) had the opportunity to contribute to Australian knowledge of this part of the Japanese economy. It is questionable whether the report makes any contribution of substance in these areas.

  1. Introduction
  2. What can business learn?
  3. What can government officials learn?
  4. What can academics learn?
  5. Concluding comments
  6. References

1. Introduction

The report, A New Japan: Change in Asia's Megamarket, prepared by the East Asia Analytical Unit of the Department of Foreign Affairs and Trade (East Asia Analytical Unit 1997), was released in June 1997. It targets Australian businessmen, government officials and academics as users of the report (p.iii). While there is no doubt these groups should have an interest in Japan, it is questionable whether they would find the report's treatment of Japan's distribution system and its agriculture sector of any real use. This is unfortunate because of Japan's importance as a trading partner to Australia, particularly with respect to agriculture; the competitiveness of the Japanese market; and the priority that the government has attached to the Japanese market as a destination for food exports.

Most of the points made in this paper have been brought to the attention of the staff of the EAAU through letters to the Department of Foreign Affairs and Trade (DFAT) and also through a letter - containing only some of the comments conveyed to DFAT - published in the Australian Farm Journal (Riethmuller 1997) . A listing of what I considered to be weaknesses of the report was sent to DFAT shortly after I received a complimentary copy of the report as a contributor to the report. The only response so far obtained from the EAAU to these comments was a rejoinder published in the Australian Farm Journal where space limitations prevented the EAAU rebutting my comments (Perkins 1997).

2. What can business learn?

Business people will find the discussion of the distribution system contradictory and reliant upon information that in some cases is six or seven years old, despite the report having "the new Japan" in its title. As an example, p.253 of the report cites data on wholesaler numbers for "the early 1990s". These data come from a 1994 article, and the figures are for 1991. This is important because changes began to occur in the distribution system in May 1990 following the release of the Interim Report on the Structural Impediment Initiative by the US and Japanese governments in April 1990. This report was the outcome of discussions between the United States and Japanese government and focused on weaknesses that each side perceived to be present in the other's economy. The Japanese distribution system was one of these areas. Partly as a result of the talks the Japanese agreed to make changes, including reform of the Japanese Large Scale Retail Store Law. This law regulated the size of retail outlets. The changes to this law - outlined in Riethmuller (1994) and Terada (1994) - made it easier for large western style supermarkets to gain approval for opening. Table 1 shows the growth in the number of large stores in Japan before and after the changes, as measured by applications to MITI for approval to open large-sized stores.

Table 1 Applications to MITI for opening of large scale stores a

Year Type I store Type II store Total
1979 576 1029 1605
1980 371 424 795
1981 194 308 502
1982 132 270 402
1983 125 276 401
1984 156 288 444
1985 158 349 507
1986 157 370 527
1987 203 365 568
1988 244 411 655
1989 332 462 794
1990 881 786 1667
1991 486 906 1392
1992 388 1304 1692
1993 313 1094 1407
1994 426 1501 1927
1995 528 1678 2206
1996 437 1397 1834

a Type I and Type II stores differ on the basis of floor area. The definition of the two types of stores differs depending upon its location (Terada 1994)

Source: MITI (pers. com., March 1997) .

The motivation for the US pressure on Japan for the reform of the Large Scale Retail Store Law was the US trade deficit with Japan. Japanese tariffs on average are about the same as those of the US at about 3 to 4 per cent (Table 2). This meant that US officials had to find another culprit for the US trade deficit with Japan and one of these was the distribution system. The argument was that it was a significant non-tariff barrier to US exports and played a part in the US trade deficit. The issue has been the focus of a number of research papers.

Miyagiwa (1993) addressed the connection between the trade imbalance and developments in the distribution system using a general equilibrium model. While the analysis involved a number of simplifying assumptions - for example, it did not take account of the different product ranges being carried in the large and in the small stores - Miyagawa arrived at two important conclusions. The first was that relaxing the Large Scale Retail Store Law would lower prices and hence increase the demand for imports. The second was that the change in the law would lead to a reallocation of resources in Japan towards the import competing sector. This would tend to offset the increased demand for imports mentioned earlier. Under plausible assumptions, Miyagiwa concluded imports could actually decrease as a result of the removal of the law. This result suggests that the reform of the distribution system could have minimal impact on redressing the US Japan trade imbalance.

Table 2: Tariff structures for the United States, the European Union and Japan

Indicator USA European Union Japan
1989 1993 1989 1993 1989 1993
(%) (%) (%) (%) (%) (%)
Structure of applied tariffs
  • Tariff free items
17.4 14.4 10.5 10.9 21.9 35.4
  • Weighted average of tariff rates
4.0 4.0 6.0 6.2 3.8 3.6
Extent of core non tariff barriers
  • Frequency ratio
25.5 22.9 25.2 21.8 8.9 8.2
  • Import coverage ratio
16.6 16.9 10.9 9.0 7.4 3.6

Source: Coughlin (1997)

A second argument pushed by critics of Japan's distribution system is that due to its inefficiency, additional costs are imposed on Japanese firms. According to this argument, firms then pass these costs on to Japanese consumers as higher prices. The EAAU takes this line and argues that Japan's high domestic prices relative to other OECD countries "originate in the distribution channel" (p.254). A problem with the claim of the EAAU is that comparison of market prices across countries is misleading because the services embodied in the commodity being purchased are almost certain to be different for different countries. Three examples will illustrate this point.

* A paper prepared by Katsura (1996) as part of a Japanese Department of Education funded study of Japan's distribution system shows that packaging and grading costs (including the cost of packing materials) are a substantial part of shipment costs for Japanese fruits and vegetables (Table 3) 1 . Presentation and uniformity of product are said to be key ingredients for success in the Japanese market. From the viewpoint of Japanese consumers, the provision of packing and grading services means that they are almost guaranteed that the quality of the merchandise they purchase will be of a particular standard. Uncertainty about beef product quality is a factor sometimes said to be behind the growth in poultry consumption in Australia at the expense of beef consumption and this is one of the reasons the Australian beef industry has been developing new grading systems for the domestic market.

Table 3: Comparison of fruit and vegetable shipping costs in Japan and Korea

Item Packing material cost Labour cost for grading and packing Transport cost for shipment Agricultural cooperative and wholesale market charge Other shipment cost Total shipment cost
(%) (%) (%) (%) (%) (%)
Horse radish
  • Japan
  • Korea
15.7

7.2

42.3

22.9

15.2

53.4

19.2

14.6

7.6

1.9

100.0

100.0

Chinese cabbage
  • Japan
  • Korea
19.0

2.1

33.1

20.7

17.3

43.3

20.4

15.2

10.2

18.7

100.0

100.0

Mandarin orange
  • Japan
  • Korea
16.3

19.3

10.1

13.1

20.9

42.9

33.4

18.5

19.3

6.2

100.0

100.0

Apple
  • Japan
  • Korea
22.7

22.2

11.4

19.9

18.7

18.0

21.8

18.1

25.4

21.8

100.0

100.0

Onion
  • Japan
  • Korea
11.4

3.3

28.7

24.4

23.3

10.3

23.3

15.4

13.3

46.6

100.0

100.0

Source: Katsura (1996) .

* The small size of Japanese houses in the inner areas of large cities such Tokyo, Yokohama and Osaka relative to those in Australia or in the United States means that household storage space is limited. Hence, following Oi (1992) , it could be argued that Japanese wholesalers and retailers provide the storage function for commodities that in countries like Australia and the USA are the responsibility of consumers. A solution for the EAAU to this problem would have been to calculate the full price for a set of commodities for a range of countries, including Japan, the USA and Australia. Only comparisons of the full price - based upon the opportunity cost of the resources used to consume the commodity - would help resolve differences in prices. A Masters thesis in the Economics Department of the University of Queensland has gone part of the way to obtaining estimates of the full price of commodities in Japan by considering the opportunity cost of time in shopping (Smith 1997) .

* Some foodstuffs usually cooked in countries such as Australia and the United States are consumed raw in Japan. At breakfast, the Japanese salaryman is likely to mix a raw egg into a bowl of rice while raw eggs are used as a dip for meat cooked in sukiyaki. Fish and meat are also eaten raw with cooked rice as sushi. Because of the possibility of salmonella contamination, Japanese consumers are obsessive about food freshness and cleanliness. This has to push up costs through the distribution chain.

A criticism that has been made of the Japanese distribution system is that products have to pass through several wholesalers before arriving at the retailer. The ratio of wholesale sales to retail sales provides one very approximate measure of the extent to which this does occur. The reason is that the larger the number of transactions at the wholesale stage, the higher the value of the ratio. Nariu and Flath (1993) investigated the issue of the number of stages in the distribution system by calculating the number of wholesale steps for selected commodities in Japan and in the United States. Table 4 presents some of the estimate they obtained for commodities that are important in Japanese diets. While there are some definitional differences between the US and Japan, Nariu and Flath pointed out there is a tendency for products that have a long distribution channel in Japan also to have a long distribution channel in the United States.

Table 4 Estimated number of wholesale steps, Japan and the United States, by type of wholesale business

United States a Japan a
SIC Type of business Number of steps Number of steps Type of business SIC
5143 Dairy products 1.81 1.67 Miscellaneous food & beverages, includes dairy products 5139
5144 Poultry 1.57 1.68 Meat & poultry 5125
5147 Meat 1.57
5146 Fish & seafood 2.27 2.56 Fresh fish, shellfish & seaweeds 5126
5148 Fresh fruits & vegetables 1.73 1.86 Vegetables & fruit 5123

a Japan data are for 1986; US 1982 data are for 1982.

Source: Nariu and Flath (1993)

Readers of the EAAU report familiar with the research of the Industry Commission may well find difficulty reconciling the EAAU view that "persistent efforts will be required to achieve improved efficiency", with econometric results reported by the Commission in September 1997. For the period 1970 to 1994, the Commission found that the average annual growth in multifactor productivity in the wholesale and retail trade was higher for Japan at 2.5% than for any of the other OECD countries involved in the analysis (Industry Commission 1997) .

Australia's recorded negative growth on this measure of -0.1% while for the USA, growth averaged 0.6%. The Commission points out that analyzing an industry such as the retail industry or the wholesale industry is difficult. In Japan, this is probably even more so since many of the premises used for the small family operated retail and wholesale operations are also used as the family home. Often the people running these operations are elderly or are only working part time. Under such circumstances, attempting to place a value on the inputs used in these operations is difficult. In addition, factors such as convenience are not easily included in measures of productivity. An anonymous reviewer of this paper made the point that the EAAU view might be reconciled with the Industry Commission results if Japan's level of efficiency was way below that of other countries in the analysis. However, the EAAU don't define what they mean by efficiency or present any data to substantiate their claim. This makes it impossible to ascertain whether this is the case.

The discussion of the role of convenience stores in the distribution system presents conflicting predictions as to their future role. On page 258, the EAAU report says "From 1991 to 1994, convenience stores grew by 6 560 outlets to a total of 48 400 (Table 9.1). This trend is set to continue". Yet on page 261, we are told that ".. the period of rapid growth in convenience stores may have passed". The EAAU report offers few insights into the characteristics of convenience stores. Young people - often high school or university students - have been the main users of convenience stores and their main purchases have been items such as bentos (boxed lunches), drinks, sweets and alcohol. Sales of grocery items - such as one might purchase at supermarkets - are still only a small part of their overall business although they are growing (Table 5). Only recently have married people begun to use convenience stores and this is probably due to these stores having replaced the small "mom and pop" shops. Convenience stores do not carry the range of products carried by supermarkets and customers can be in and out of a convenience store in a few minutes.

Table 5 Convenience store sales, selected items sold in convenience stores and the share of sales made to customers under 25 years and younger, 1985 to 1995

Year Sales a Sales of Customer share
Alcohol Food Sweets Magazines 15 years & under 16 to 25 years
(¥'00 mill.) (%) (%) (%) (%) (%) (%)
1985 31 550 9.5 59.5 12.6 3.6 8.8 61.8
1986 37 892 9.9 54.0 13.0 4.4 8.0 61.0
1987 44 258 10.6 51.7 13.5 5.1 7.5 58.5
1988 50 896 11.8 50.5 13.9 5.6 7.0 56.7
1989 56 994 12.7 48.3 12.8 6.0 6.6 54.6
1990 62 807 13.1 47.0 12.5 6.3 6.4 52.7
1991 68 962 13.6 46.7 12.1 6.5 6.2 51.4
1992 69 859 14.5 44.6 11.7 6.7 6.0 50.5
1993 70 069 14.1 43.8 11.4 6.8 5.8 49.9
1994 72 260 14.1 42.5 11.3 6.9 5.7 48.4
1995 72 258 12.9 41.3 10.2 6.9 5.6 48.0

a Sales data are nominal.

Source: General Research Center of Food Service Industries (1997) pp409-410 & (1995), pp416 - 417

Surprisingly the EAAU does not build on the material presented in their last report on Japan's economy (East Asia Analytical Unit 1992) . While the authors of that report did not go into details of the changes in the distribution system that were already well and truly underway when the report was published, they acknowledged that changes in the Japanese distribution system were occurring, but argued that change was likely to occur only very slowly because of the influence of unidentified interest groups. It is puzzling that the 1997 report did not explain how these interest groups lost their power. One group that will become increasingly important in the next decade is elderly consumers. Old people do not have the mobility of the young and middle aged to travel to large supermarkets and discount stores. The personalized service provided by the "mom and pop" stores is important to elderly consumers. To the extent that the traditional shopping precincts contract and in some areas disappear, elderly people will be disadvantaged, a point recognized by Terada (1994) .

Many readers of the report - particularly those who have been in the market for Japanese cameras, watches, video cassette recorders, television sets, audio systems and cars - will be surprised by the following passage (p.253):

"Excessive protection, regulation, multiple tiers and marked product segmentation, close vertical associations and loyalties, and rigid pricing discouraged competition and change. As a result, consumers had limited choice of prices and products."

Japanese consumers actually have had a wide choice of products available to them. Lasserre and Schutte (1995) point out that there are more than ten local manufacturers of air conditioners, cameras, copiers, audio or video equipment and trucks, and nine national car manufacturers. New products appear regularly and this is one of the ways that Japanese firms compete with one another. Hence, to say that Japanese consumers had limited choice of prices and products is nonsense. The pricing rigidity that the EAAU refers to does not necessarily lead to inefficiency.

According to the special service theory developed by Telser (1960) and applied by Pashigian (1997) to explain manufacturers' behaviour, it is sensible under certain conditions for a manufacturer to encourage retailers to supply educational services to consumers through employing well trained staff since this could shift the demand curve for the manufacturer's product to the right. These services are costly to provide and so the retail margin - the difference between the retail price and the wholesale price - has to be large enough to cover the cost incurred by retailers providing the product information. To prevent consumers from free riding by obtaining information on the quality attributes of a product from a service rich retailer only to buy at a cheaper price from a service lean retailer, manufacturers set a fixed retail price.

Any description of Japanese food consumption is not complete without reference to changes in Japanese diets. The EAAU refers to the effects of "increased affluence and changing lifestyles on consumer preferences"(p.44). The evidence that is presented to substantiate this claim - Table 2.6 on page 46 of the report - is reproduced in Table 6.

Table 6 Japanese food consumption, as reported in EAAU (1997)

Prepared Foods Are Very Popular - Annual Food Expenditure by Household 000 Yen

1985 1988 1991 1994 Per cent change 1985-1994
Rice

Bread

Fish and shellfish

Meat

Vegetables and seaweed

Milk products and eggs

Prepared foods

Green teas

Black teas

Coffee and cocoa

Fruit juice

75.3 (8)

23.5 (3)

130.1 (14)

96.8 (10)

114.8 (12)

44.0 (5)

60.0 (6)

6.6 (1)

1.3 (<1)

7.1 (1)

7.9 (1)

64.4 (7)

24.2 (3)

128.9(13)

93.1 (10)

117.9(12)

40.9 (4)

68.3 (7)

6.4 (1)

1.6 (<1)

7.0 (1)

9.3 (10)

61.8 (6)

27.6 (3)

140.0 (13)

98.5 (9)

135.5 (13)

47.9 (4)

85.0 (8)

6.6 (1)

1.0 (<1)

7.3 (1)

11.8 (1)

63.4 (6)

28.8 (3)

128.2 (12)

88.9 (8)

128.2 (12)

46.6 (4)

89.4 (9)

6.7 (1)

0.8 (<1)

7.6 (1)

12.5 (1)

-16

22

-2

-8

12

6

50

2

-41

7

58

Note: Parentheses indicate percentage of total food expenditure, rounded to nearest whole number.

Source: Japan External Trade Organisation , 1996b, p. 25 (based on data from the Office of the Prime Minister's Report on the Household Budget Survey , 1994). Source: EAAU (1997), p.46.

Apart from the obvious error showing fruit juices accounting for 10 per cent of food expenditure in 1988, a surprising feature of this table is that it covers only between 50 per cent and 60 per cent of food expenditure. Important items - to Japanese consumers and possibly also to Australian food processors - such as noodles, fruit, oils and fats, cakes and cookies, cooked food and alcoholic beverages - were not part of this discussion and presumably played no part in the EAAU assessment. The reasons for not considering these items are not given.

A second problem with this table is that the time period it covers - from 1985 to 1994 - was a period of significant change in the protection given to Japan's agricultural sector. For example, import quotas on beef were removed in 1991 following a three year transition period while quantitative restrictions on a number of other agricultural products including fruit products and a range of processed foods were also removed (ABARE 1988) . Hence trying to draw any form of conclusion from data collected over such a short period when the policy environment has changed so significantly is courageous to say the least.

There are other indicators of the change in Japanese diets that would be of more interest to the business community than the incomplete data in Table 6. Japanese statistics on food are a rich source of information. Table 7 presents an example. These data also cover the period when import reforms were being introduced into Japan so care needs to be exercised in their use. The information shows the number of meals in a year where different foods were consumed by a sample of consumers. Rice is by far the most important food, with plain rice being part of 461 meals in 1993 and 533 meals in 1984. (In 1984, 1098 meals are assumed to have been consumed while in 1993, the number is 1095). Other popular foods were toast, curry with rice, rice ball and noodles.

Table 7 Comparison of the number of appearances of selected food items in daily meals

Item Number of appearances in 1984 Number of appearances in 1993
Plain rice 533 461
Toast 139 99
Chinese wheat noodles 37 43
Bread or bun 48 53
Wheat noodle 29 34
Spaghetti 19 23
Sandwich 21 26
Hamburger 3 4
Breakfast cereal 1 13
Donburi 15 19
Hot cake 3 7
Curry with rice 38 43
Japanese style buckwheat noodle 12 18
Rice ball 28 43

Source: Food and Agricultural Policy Research Center (1997), p.100

The material in the report dealing with Japanese diets would have benefited from referring to the many studies that have addressed this issue. The articles by Tokoyama and Egaitsu (1994) , Higuchi (1991) and Morishima, Aita and Nakagawa (1993) would have been good places to start because they contain information on price and income elasticities and - importantly - report the views of Japanese scholars.

A route into the Japanese market that is being explored by the Queensland Department of Primary Industry with the assistance of the Rural Industries Research and Development Corporation is the use of Japanese consumer cooperatives. This work is potentially very valuable because the consumer cooperative movement in Japan is immense with over 18 million household members, most of whom are affluent. They are members of cooperatives because of concerns about food quality and food safety (Riethmuller 1996).

The EAAU report gives this group just one line and reaches the conclusion that they "have been hard hit". While this is the type of phrase sometimes found in the popular press, it is out of place in a government report. The reader is given no idea of what this assessment means or is based upon as no supporting evidence is presented. There is a cross-reference to agricultural cooperatives in another part of the report and to a report prepared by Riethmuller (1996) for the EAAU. With regard to the agricultural cooperatives, they are nothing like consumer cooperatives. Set up under the Agricultural Cooperative Law of 1947, their mandate was to represent their farmer members in the purchasing of inputs and in the marketing of outputs. They also provide other services such as banking and insurance.

Examination of the data on consumer cooperative membership and real turnover contained in Riethmuller's report (Figure 1) gives no evidence of the consumer cooperatives being "hard hit". Consumer cooperatives do not have profit maximisation as an objective - their goal is to provide their members with high quality safe food. Ada and Kawasaki (1997) in an updated version of their 1995 report, provide an excellent discussion of the role of consumer cooperatives and their possible value to Australian industry.

Figure 1 Membership and turnover of consumer cooperatives

The EAAU report gives advice to business when it says that "It is therefore very important for exporters and investors to research the market carefully ..." (p.458). Yet the rice failure in 1993 is said on p.28 and elsewhere in the report to be due to a drought - it was actually due to unseasonably cool weather that prevented the rice from ripening. The "Guess whose mum's got a Whirlpool?" title to the table on p.266 about household appliances stereotypes all Japanese washing machine owners as 'mums'. However, about 11 million of Japan's 43 million households in 1995 were single person households while in 1995, 67% of households did not have children (Asahi Shimbun Publishing Company 1996, p.50) .

Even straight forward information is incorrectly reported. Agricultural producers in the USA are shown in the Agrifood chapter to have received prices greater than those received by farmers in the European Union in 1995. The nominal assistance coefficient for the USA is said to be 2.0 as compared to 1.9 for the EU (p.361). This figure of 2.0 implies that US support to farmers increased by about 70 per cent even as the Uruguay Round of Trade negotiations were underway. The US figure should be 1.17 (OECD 1996, p.179). Finally, the DFAT report quoted a 1993 study that said Japanese firms saw Australian managers as 'amateurish, indulgent and delivering poor product quality and customer service' (p.159). Bothering to report such a harsh assessment may not endear the DFAT report to readers from the business community. It also seems out of place since the report (citing a US study) says that in Japanese firms, attitudinal and structural impediments "abound" preventing Japan from making effective use of its female labour force (p.37). Further, the report adds, employees are "often subject to the whims of management in job assignment, regardless of individual abilities and preferences" (p.37). Perhaps the Australian managers are not so bad after all.

3. What can government officials learn?

Australian government officials visiting Japan and running with the argument contained in the report that "government intervention policies have effectively insulated the [Japanese farm] sector from competition, technological innovation and restructuring" (p. 328) will be told by Japanese officials that dairy farm numbers fell from 50 900 in 1992 to 39 300 in 1996 (there were over 380 000 in the mid 1960s) while for the beef industry, the decline has been from 199 000 in 1993 to 142 800 in 1997 (they numbered 473 000 in the mid 1970s) ( Longworth 1983 ; Riethmuller and Kobayashi 1993 ; Agriculture and Livestock Industries Corporation 1997 ). Data on the number of rice farmers tell the same story with around 100 000 farmers exiting the rice industry between 1992 and 1994. Table 8 shows changes that have occurred in Japanese farm numbers by comparing the peak numbers with numbers in either 1995 or 1996. While there have been changes in definitions over the period covered by the table, this does not alter the point that Japanese agriculture has changed 2 .

Table 8 Comparison of the peak number of farms with numbers in 1995 or 1996

Type of farm Peak number a Number in 1995 or 1996 Decline (%)
Rice cultivation 4 885 000 (1965) 2 305 330 (1995) 53
Dairy farming 417 000 (1963) 41 600 (1996) 90
Beef cattle farming 2 319 000 (1956) 154 900 (1996) 93
Pig farming 1 025 000 (1962) 16 000 (1996) 98
Poultry farming 4 508 000 (1955) 10 400 (1996) >99

a The year when farm numbers peaked is in parenthesis

Source: Japan Livestock Technology Association (1997)

It seems that the EAAU believes that future change in Japan's agricultural sector is likely to be "incremental rather than radical" (Perkins 1997) . It is not clear how this assessment has been arrived at. While the extent of change in industries such as poultry and pig farming is likely to slow, the age structure of Japanese farmers - the 1995 Agricultural Census showed 41.8% of primary farming households were 65 years and older in February 1995 - suggests that in the next few years, change in Japan's farming industries will be anything but incremental as these elderly farmers move out of agriculture. Economic Planning Agency projections of farm numbers, reported by Imamura, Tsuboi and Odagiri (1993) and based upon the 1990 agricultural census, were for farm numbers to decline by about 700 000 between 1990 and 2000 and then to fall by another 690 000 to 2 430 000 in 2010.

The cultivated area of land in Japan has also been declining, and the rate of decline appears to have been increasing (Table 9). This is an important development because it helps to explain why it is that the average area of Japanese farms has not increased in spite of a rapid decline in the number of farmers. This point was overlooked in the EAAU report.

Table 9 Cultivated land area in Japan, 1975 to 1995

Year Cultivated land area (ha) Decline (%)
1975 5 572 000 -
1980 5 461 000 2.0
1985 5 379 000 1.5
1990 5 243 000 2.5
1995 5 038 000 3.9

Source: MAFF (1996)

If Australian officials repeat the claim in the EAAU report that consumers "paid almost double world prices for agricultural products"(p.337), the Japanese may tell them that a Ministry of Agriculture, Forestry and Fisheries (MAFF) study found that Tokyo's food prices in November 1996 were about 20 per cent higher than in other high income cities such as New York, Paris and London - not double. Perhaps more significantly, the MAFF study found that foods popular among Japanese consumers - such as pickled plums, soysauce and miso - are actually cheaper (not surprisingly) in Tokyo than in Paris, Geneva and London. Tokyo prices were about 4 per cent higher than in New York (Japan International Agricultural Council 1997; Food and Agricultural Policy Research Center 1997).

In high-income countries, the prices for foods purchased by consumers have a high service component embodied in them. A 30 or 40 cent change in the liveweight price per kilogram of beef in Australia probably has relatively little impact on the price a Japanese consumer would pay for 100 g. of thinly sliced beef for use in a home prepared sukiyaki meal. In any case, Japanese research has found that quality, convenience, diversification of diets and health concerns have increased in importance as explanators of Japanese food consumption while income and prices have diminished in importance (Tokoyama and Egaitsu 1994) .

The unreferenced claim made about high restaurant prices (p.337) is a bold one. Comparing restaurant prices across countries is probably even more difficult than comparing retail food prices. Presumably the EAAU has done the comparison, but if it has its results are different to those from MAFF who say that Japanese restaurant prices are actually cheaper than in many other cities. This is probably not surprising since the large number of restaurants and eating places in Japan would be considered by most people as indicative of a competitive market. The majority of these restaurants are small and family run. In 1992, for example, 214 715 of the 474 048 restaurants had only one or two workers (Table 10). Such restaurants are not found in the Ginza and Roppongi where many western visitors to Japan dine and form the incorrect conclusion that restaurant prices are high. 

Table 10 Size distribution of restaurants in Japan, 1992

Number of workers Number of restaurants Total employees Annual sales (¥ mill.) Seating capacity of restaurants
1 - 2 214 715 359 764 1 670 274 4 457 329
3 - 4 124 946 423 660 2 148 515 3 964 499
5 - 9 82 269 522 523 2 971 901 4 167 186
10 - 19 32 100 419 109 2 546 050 2 704 704
20 - 29 9 424 220 834 1 280 274 1 111 148
30 - 49 6 976 258 545 1 354 023 1 029 621
50 - 99 3 372 211 373 952 435 596 765
100 and over 246 32 355 211 528 135 747
Total 474 048 2 448 163 13 135 001 18 166 999

Source: Center of Food Industries (1995) p190

An example of the data on prices in a noodle restaurant is presented in Table 11 while the distribution of prices in a family style restaurant is presented in Table 12. The items in Table 11 illustrate the difficulties of cross country comparisons while those in Table 12 suggest that prices are probably not too different to those paid in restaurants such as Sizzlers in Australia or Ponderosa in the USA. Data presented by the Economist newspaper show Big Mac hamburgers to be cheaper in Tokyo than in Sydney, New York or in the 27 other cities involved in the comparison, when price is measured in terms of the amount of time that must be spent working to purchase a Big Mac (Economist 13 October 1997, p.136).

Table 11 Prices at Japanese noodle restaurant

Item 1992 1993 1994
(¥) (¥) (¥)
Soba udon (buckwheat) noodles 434 449 449
Soba udon noodles in soup with thin slices of fried bean curd 470 482 493
Soba udon noodles in soup with tempura 739 767 764
Bowl of rice with pork cutlet 718 722 728

Source: General Research Center on Food Service Industries (1995), p.191

Table 12 Expenditure per person in a family restaurant, 1994

Age a ¥700 & under ¥700 - 800 ¥800 - 900 ¥900 - 1000 ¥1000 - 1200 ¥1200 - 1500 ¥1500 - 2000 ¥2000 & over Average
(years) (%) (%) (%) (%) (%) (%) (%) (%) (¥)
20 - 29 0.0 4.8 6.5 6.5 22.6 35.5 17.7 6.5 1 374
30 - 39 1.3 3.8 13.8 16.3 30.0 26.3 7.5 1.0 1 159
40 - 49 0.0 2.6 7.8 10.4 18.2 26.0 29.9 5.2 1 406
50 - 59 0.0 3.3 1.6 8.2 23.0 31.1 26.2 6.6 1 435
All consumers 0.4 3.6 7.9 10.7 23.6 29.3 20.0 4.6 1 335

a The data came from a sample of 280 respondents.

Source: General Research Center on Food Service Industries (1995) p.144

The report discusses the performance of Australian industries in relation to exporting to Japan, including the sugar industry. Describing Australia's exports of sugar, molasses and honey, the report says that they "grew at twice the rate of Japan's overall imports of these items. This strong and sustained growth increased imports from US$64 million in 1985 to US$259 million in 1995" (p.128). Checking the data on export volumes from ABARE tells a different story (Table 13).

Table 13 Australian exports of raw sugar to Japan, 1985-86 to 1994-95

Year Australian exports(Kt.)
1985-86 551.0
1986-87 467.2
1987-88 711.0
1988-89 725.5
1989-90 735.9
1990-91 564.5
1991-92 455.5
1992-93 795.2
1993-94 770.0
1994-95 680.0
1995-96 663.6

Source: ABARE (1996 and1988)

Japanese consumption of sugar as a food item has been falling because Japan is a mature market. However, the consumption of sugar through processed foods has been increasing as has the consumption of artificial sweeteners. The growth of the artificial sweetener market has come about because of the high cost of sugar in Japan. Many of the farmers who produce sugar cane do so on farms that are about 0.68 hectare in area, as compared with the 70 to 100 hectare area of many Australian sugar cane farms. However, just as the Australian sugar industry is important regionally, so too is the Japanese sugar industry. It is concentrated in Okinawa (about 61 per cent of the area of sugar cane) and Kagoshima (the other 39%) and in Hokkaido for sugar beet. The sugar beet farms in Hokkaido are about 5.2 ha in area and the sugar beet is an important part of the crop rotation.

4. What can academics learn?

Academics will learn from the report that DFAT staff are willing to use data from six years to arrive at trend growth rates. The authors of the EAAU report do this for malt (p.130) and find a trend rate of growth between 1990 and 1995 of 63.3 per cent. This leads to malt exports being identified as an area where Australia has done well. According to Japan External Trade Organisation (JETRO) figures (JETRO 1995, p. 30) , Australia actually did worse than its competitors for three of the six years on which the EAAU estimate is based. The JETRO data show Australian exports of malt to Japan in nominal terms in 1991 to be US$59 m. (145 658 t.); in 1992 they were US$54 m. (140 273 t.); and in 1993 US$48 m. (119 389 t.). The EAAU data (which may or may not be in nominal terms - it is not stated) show that 1995 imports from Australia were US$54.3 m. It is difficult to see how the EAAU arrived at its estimate of a 63.3 per cent trend rate of growth for Australian exports.

For academics to be swayed by the arguments in the report, they would expect to see a more even coverage of views and research findings. Surprisingly, the EAAU staff could find little of value from journals nor, with few exceptions, could they give any space to the views of Japanese researchers. Table 14 provides information on the references provided at the end of Chapter 9 (Distribution) and Chapter 11 (Agrifood).

There have been many recent articles in the Columbia Journal of World Business, Japan and the World Economy and the Journal of Rural Economics (a Japanese journal) to name just a few that would have helped the EAAU understand Japan. Surprisingly neither the very useful studies by the Queensland Department of Primary Industries on Japanese retailing and on consumer cooperatives, nor the comprehensive studies on the Japanese food processing sector or the Japanese food service market published by the US Agricultural Trade Office in Tokyo rate a mention.

Extensive use is made of the Nikkei database. Users of this data base type in keywords and newspaper articles on these ics for as long or as short a period as desired can be obtained. In a couple of hours dozens of articles can be found. Obviously it is a useful source of information, but journalists have been known to make errors in reporting stories. 

Table 14 Number of published articles on agriculture and distribution cited by EAAU (1997)

Article Distribution system Agrifood
Articles by Japanese economists/agricultural economists in refereed journals
  • in English
4 a 0
  • in Japanese
0 0
Articles in refereed journals
  • in English
1 2
  • in Japanese
0 0

a Includes Kikuchi as this book was originally published as a volume of the Journal of Marketing Channels.

Source: EAAU (1997), pp278-79; and pp369-70 .

Academics researching the food market in Japan and its trade with Australia will be surprised that the production outlook for Japan's agriculture rates only two and a half lines of text: "Government projections to 2005 indicate that rice, potato, fruit and sugarbeet production will fall, while that of cut flowers, forage crops, soybeans, beef and other will increase" (p.329). No assessment is given as to the likelihood of the government projections being realised nor is there any discussion of the assumptions behind the projections in the accompanying table.

It is not clear how the projections treated the aging of the Japanese population, nor whether DFAT agrees with the Japanese forecasts. Nor is anything said about how Japan's approach to the next round of WTO trade negotiations is likely to influence the projections. Surprisingly, the musing of the "37 year old Tokyo housewife" Makiko Mannami 3 reported on p. 230 gets more coverage in the report than the Japanese projections. She says (about imported oranges, apples, grapefruit and pumpkins sold in her supermarket) "I can't read the labels on some of them but they're cheap and look good, so I buy them all the same" (p.230).

5. Concluding comments

The introduction to this paper said that it was questionable whether the EAAU's intended audience for this report will find its discussion of the distribution system and the agricultural sector of any value. This is unfortunate because of all of the countries in the Asia Pacific region, Japan is without doubt the one with the greatest amount of information and currently the one that is of most importance to the Australian economy. Government statistics are of high quality and there are many research institutes and universities that collate and publish useful information. Increasing amounts of this material are finding their way into the internet, as well as business-oriented publications and professional journals. Business, the academic community and government officials would likely gain more insights into Japan's agricultural sector and distribution system from these other information avenues than from the EAAU report.  

References

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1 The data on Japan came from MAFF while the Korean data was obtained from the Korean Agricultural Economics Institute.

2 Inamura, Tsuboi and Odagiri (1993) present a historical review of Japan's farm structure.

3 Japanese colleagues seeing this anecdote were very amused. They felt the name was probably fictitious. They were not able to confirm that Japanese government reports present the views of Bazza and Sheila Sheepdip in their writings about developments in the Australian economy.

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