Japan Agribusiness Report Q3 2016 - New Market Research Report

We continue to hold a mixed outlook for the Japanese agricultural sector as a whole in our latest Q3 2016 report update . We envisage some minor gains in the livestock sector , but the grains sector will remain exposed to production volatility. We are anticipating strong production growth this year in pork and soybean.

The ageing Japanese agriculture sector is seeing some green shoots in the form of technological innovations. The use of robots in primary industries of agriculture and fisheries, and utilisation of data in dairy farming is proof that the agriculture industry is making changes to the way it operates - a long-awaited development for the traditionally old-fashioned and less-progressive industry.

The Japanese government has launched a series of initiatives to support technological advancements in the agriculture industry, including an investment of USD10mn in robots aimed at reducing farming workloads and investments into cloud-based agriculture technologies, such as wearable devices and peripherals for monitoring livestock.

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On the political front, the government's plan to diminish the influence of the once-powerful Central Union Agricultural Cooperative (JA-Zenchu) is a strong indication that much-needed structural reform of the agriculture industry is under way. By 2019, the JA-Zenchu is expected to become a general incorporated association with co-ops having the option of engaging independent auditors, instead of working with those associated with JA-Zenchu. By reducing the power of the union, the government is sending out a clear sign it is serious about the reforms, as further reflected in the increased openness towards a compromise for the Trans-Pacific Partnership (TPP).

Key Forecasts:

Rice production will grow by a modest 0.35% this year to reach 7.68mn tonnes; consumption will jump by 1.16% to reach 8.7mn tonnes.

Pork production will grow by 2.07% to reach 1.28mn tonnes; demand will remain around 2.59mn tonnes.

Sugar consumption will decline by more than 5.7% in 2016 to reach 2.03mn tonnes; and we estimate a consistent decline in demand over the course of our forecast period.

Industry Outlook

Non-tariff rice quotas from the US and Australia have been proposed at 70,000 tonnes and 80,000 tonnes respectively in return for maintaining a high tariff on the country's staple. For rice from the US, a 50,000-tonne quota has been suggested; however, this could be increased progressively up to 70,000 tonnes over a period of 10 years or more. Given that the 70,000 tonnes is significantly lower than the 175,000 tonnes originally necessitated by the US, this will continue to be a sensitive area of negotiation between the countries. At present, Japan is required to import 770,000 tonnes of rice, just 7% of total Japanese rice consumption.

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