Japan's pricy farmers eye export push, unfazed by TPP


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Soichi Furuya, a third generation fruit farmer, stands near grape vines at a fruit farm in Fuefuki, Yamanashi prefecture, Japan October 8, 2015. Soichi Furuya, a third generation fruit farmer, stands near grape vines at a fruit farm in Fuefuki, Yamanashi prefecture, Japan October 8, 2015.


Japan's high-cost farmers, sheltered by prohibitive import tariffs, might appear to be most at risk from a trans-Pacific free-trade deal agreed this month, but they are instead making an unlikely push to export more of their pricy produce.
The latest figures show that Japan's agricultural sector exports only about 5 percent of its output, but Prime Minister Shinzo Abe sees the Trans-Pacific Partnership (TPP) deal, reached in Atlanta on Oct. 5, as an opportunity, not a threat.
"We should challenge with courage. It is time to make innovation happen and take the step into the open world," he said after 12 nations including Japan and the United States concluded TPP, which covers about 40 percent of the global economy and aims to cut or eliminate tariffs and quotas.
It will take more than courage to persuade the world to fork out for the country's high-cost farm goods - its producer price for rice, for example, is about eight times the American equivalent, according to the U.S. Department of Agriculture, and reforms will be required to boost efficiency.
"The quality of Japan's agriculture products are high but they are expensive, which is the biggest obstacle for expanding the (export) sales channel," said Nobuhiro Suzuki, professor of global agricultural sciences at the University of Tokyo.
But Japanese farmers have a compelling incentive.
"The domestic market is saturated," said third-generation fruit farmer Soichi Furuya, who started exporting grapes and peaches to Hong Kong and Taiwan, not in the TPP, a decade ago.
He said most of his business will remain domestic, but Japan's shrinking population made export markets attractive, and its high-quality produce was capable of cracking them.
Soichi Furuya, a third generation fruit farmer, displays a basket of grapes near grape vines at a fruit farm in Fuefuki, Yamanashi prefecture, Japan October 8, 2015.
"I think the excellence of Japanese fruits still has not been fully recognized in the world," said Furuya, 42, standing under overhanging vines of sweet red Kaiji grapes in Yamanashi prefecture, the heart of Japan's fruit industry.
Its fruit and vegetables are already recognized by shoppers in Hong Kong, Japan's biggest market for farm produce.
"Some of them definitely deserve the high price," said mother of two Rita Lo on one of her regular three shops a week at a Japanese supermarket in Taikoo, Hong Kong, where a half kilo of Japanese grapes was selling for HK$199 ($25.68), opposite American equivalents at just HK$37 ($4.77).
Lo said she spends about HK$200 each visit on Japanese fresh goods because they are "tastier, look better and of higher quality" and would buy still more if they were cheaper.
Fragile fruits
For Furuya, the chief obstacle to cutting prices is not overseas tariffs - Hong Kong imposes none on his fruit - but quarantine issues and delivery costs for his fragile cargo.
"It will be great if transportation technology develops further and infrastructure for exporting improves," he said.
Industry insiders say transport costs for grapes can add 50 percent or more to the price, and for beef it is around 10 percent. Beef and fruit are among Japan's main food exports.
Some companies such as the logistics units of ANA Holdings Inc (9202.T) and Yamato Holdings Co (9064.T) are already trying to address these issues.
Katsuhiko Umetsu, head of Yamato Transport's global business development division, said better delivery options were key to increasing overseas demand for Japan's agricultural products.
Soichi Furuya, a third generation fruit farmer, holds a bunch of grapes on grape vines at a fruit farm in Fuefuki, Yamanashi prefecture, Japan October 8, 2015.
"What we decided was to offer a service to farm producers so they can export their products in small lots," he said.
By consolidating small lots from all over Japan to a 24-hour airport in Okinawa, the nation's farm products can be delivered to neighboring Asian nations the following day.
Abe's government is aiming to raise the nation's farm, fishery and forestry exports to 1 trillion yen ($8.4 billion) by 2020. Last year, they hit a record high of 612 billion yen, up 11 percent from 2013.
TPP will help. The deal will more than double the U.S. non-tariff quota on Japanese beef over 14 years and then remove the tariff altogether. And Vietnam will eliminate its current 11-15 percent tariff on Japanese fish as soon as TPP takes effect, which still requires the non-trivial step of ratification.
But Japanese agriculture is not putting all its eggs in the TPP basket.
"Regardless of TPP, there is a limitation for the agriculture sector if it continues to target the domestic market only," said a farm ministry official.
Farmers and the business sector are looking with particular relish at the enormous promise of China, which is not a member of TPP but is looking to agree a similar trade pact in Asia.
"I think there is a need for Japanese products in China," said Masaki Tanimura, director of ANA Cargo. "It would be huge if China opens up its market."

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