Report Highlights: 

In 2013, Japanese potato production decreased by 3.5 percent to 2.41 million metric tons. Given this decreased availability of domestic potatoes and increased demand for potato chips, imports of fresh potatoes jumped by 28 percent. Imports of frozen potato products, particularly French fries, continued to be robust. A potential contraction in Japanese domestic potato production, expected to occur over the next decade, could present greater opportunities for imports, particularly U.S. potatoes, as they are highly valued in quality and price by Japanese users and consumers. Aggressive and strategic marketing activities by the U.S. potato industry have been instrumental in developing new demand in growth sectors.

Market Overview 

Since Japan’s potato production peaked at 4.1 million MT in 1986, it has steadily declined. However, demand has remained more or less constant at around 3.5 million metric tons (MT) over the last few decades, and to meet this shortfall, imports have gradually increased.

Between 1970 and 1997, annual Japanese potato per capita consumption increased in line with the expansion of fast food restaurants serving French fries. Over the last two decades, per capita consumption has remained between 15 and 16 kilograms per year. 

Fresh Potatoes 

Production 

Japan’s Fresh Potato 

Production Year

Area Planted (ha)

Production (MT)

Yield

(MT/ha)

Utilization (MT)

2004

87,200

2,888,000

33.1

2,357,000

2005

86,900

2,752,000

31.7

2,242,000

2006

86,600

2,635,000

30.4

2,135,000

2007

87,400

2,873,000

32.9

2,370,000

2008

84,900

2,743,000

32.3

2,251,000

2009

83,100

2,459,000

29.6

2,001,000

2010

82,500

2,290,000

27.8

1,864,000

2011

81,000

2,387,000

29.5

1,961,000

2012

81,200

2,500,000

30.8

2,061,000

*2013

79,700

2,412,000

30.3

2,004,000

**2014

80,000

2,456,000

30.7

2,032,500

Source: MAFF *Note: 2013 data is preliminary ** FAS/Tokyo forecast

In 2013, the average yield for Japanese fresh potatoes decreased by two percent to 30.3 MT per hectares (ha) due to a lack of rain during the growing season. The total planted area also decreased by two percent to 79,700 ha due to a number of factors, including the exiting of aging farmers and an overall switch to wheat and/or buckwheat production for soba due to unstable prices for potatoes used for non-fresh potato products. As a result, Japan’s fresh potato production decreased by 3.5 percent from the previous year to 2.41 million MT. 

Hokkaido, Japan’s northernmost island, is the major potato producing region in Japan, accounting for nearly 80 percent of the nation’s total output. Hokkaido’s cool temperatures and large-scale agricultural land provide suitable conditions for potato production. Potatoes in the Hokkaido region are planted in late spring, after the ground has thawed, and are harvested from August to October. Much of Hokkaido's potato production is stored and distributed to the market through the following spring. In 2013, Hokkaido’s fresh potato production was 1.88 million MT, down three percent from the previous season due to a lack of rain during the growing season. For the 2014/2015 season, the production is expected to increase slightly over the previous year. 

In addition to Hokkaido, the island of Kyushu is also a major producer of potatoes with its prefectures of Nagasaki and Kagoshima as Japan’s second and third largest potato producing areas, respectively. Potatoes in Kyushu (as well as the island of Honshu, the main island of Japan) are planted and harvested throughout the year: winter (harvested from February through April), fall (harvested in November and December), and spring (May through July). These potatoes are mainly sold fresh as soon as they are harvested. Due to fair weather, Post estimates Kyushu’s production for the 2013/2014 season to be the same as the previous year and expects similar production levels for the 2014/2015 season as well. 

According to trade sources, due to favorable weather during the growing season, Japan’s production volume for potatoes for the 2014/2015 season is expected to increase slightly over the previous year. However, over the next decade, Japan’s potato production is expected to further decline due a number of factors, such as decreasing farm size and aging famers retiring without successors. Given these challenges, Japanese manufacturers of potato products, such as potato chips, remain concerned about the future availability of domestic potatoes for processing. 

Consumption 

As reported in the Market Overview section, per capita consumption of potatoes has remained between 15 and 16 kilograms over the last decade. According to Japan’s Ministry of Agriculture, Forestry, and Fisheries (MAFF), 33 percent of Japanese potatoes are consumed fresh at households and restaurants. The starch industry uses 36 percent, and the food processing sector, including potato chips and frozen potato product manufacturers, utilizes about 24 percent. The remaining seven percent is used primarily as seed potatoes and feed. 

The majority of processed potato products is mainly potato chips (67 percent), followed by frozen potato products (18 percent), and potato salad (nine percent). 

In MY 2013/14, Japanese imports of fresh potatoes from the United States reached a record level of nearly 20,000 MT, an increase of 28 percent over MY 2012/2013. The Japanese government first began allowing imports of U.S. fresh potatoes in 2006, entirely for potato chip manufacturing. Several developments contributed to the robust growth of Japanese imports of U.S. chipping potatoes in MY 2011/12, including a one-month extension to the allowable shipping period - increasing the period to February to July (from February to June) - and the approval of a new processing facility in Kagoshima, on the southern island of Kyushu. In addition, during the 2012 shipping season, the United States secured MAFF’s approval of two additional U.S. states (Nevada and Montana) as eligible potato shipping states. This approval significantly contributed to the increase in imports of U.S. fresh potatoes in MY 2011/12. With two chipping facilities now approved to handle U.S. potatoes (in Hiroshima and Kagoshima), Japanese potato chip manufacturers continue to increase their imports. 

During the 2014 shipping season, no additional states or facilities were added, and the shipping season remained the same (February-July). Despite this lack of progress, the demand for U.S. chipping potatoes was strong last season, mainly due to an increase in sales of potato chips and a decrease in domestic potato production. The fact that imports continued to increase during the 2013/2014 season shows that the relationship between U.S. suppliers and Japanese manufacturers has been established; the manufacturers’ commitment to purchasing from the United States is expected to continue in the coming year. Assuming no changes to the existing policies, Post anticipates that Japanese imports of potatoes will hold steady at approximately 20,000 MT in 2014/15. 

Trade – Exports 

Japan’s exports of fresh potatoes in MY2013/2014 increased slightly over the previous year to 33 MT. However, as total demand for fresh potatoes in Japan exceeds domestic production, Post expects that there will be little incentive to significantly expand exports in the near future. 

Policy 

Eligible states: Currently, Japan allows imports of U.S. fresh potatoes strictly for chip manufacturing. Under the protocol established in 2006, 14 U.S. states were eligible to ship potatoes to Japan under certain conditions, including field designation. Originally, eligible U.S. states were: Arizona, California, Colorado, Florida, Idaho, Maine, Michigan, Minnesota, New Mexico, North Dakota, Oregon, Texas, Washington, and Wisconsin. However, when the market opened, only fields from the state of California had been designated to ship fresh chipping potatoes to Japan. In 2010, after extensive bilateral consultations and successful MAFF on-site audits, fields in the state of Washington were designated to be able to ship to Japan. In 2012, MAFF also registered Nevada and Montana as eligible to ship to Japan. 

Shipping season: Starting in 2012, MAFF extended the shipping season to include the month of July. As a result, the United States can now export potatoes to Japan from February through July. 

Inland transportation: According to the 2006 import protocol, MAFF does not allow inland transportation of U.S. potatoes from the port to the chipping facilities due to phytosanitary concerns. As a result, only port-area chipping facilities are allowed to request MAFF for approval to import and process U.S. potatoes. Unlike the Hiroshima Port, the Kagoshima Port, where the newly-approved facility is located, is a local port that cannot handle large-scale vessels. Consequently, U.S. potatoes need to be loaded onto smaller coastal vessels at the nearest port (Shibushi), approximately 100 kilometers east of Kagoshima. As the smaller vessels are not equipped to keep the cargo refrigerated, the eight to nine hour travel time to Kagoshima can cause premature sprouting and adversely affect the quality of the potatoes. Additionally, Japanese chipping manufacturers find the current process extremely inefficient and costly. Thus, they have requested MAFF to allow inland transportation by truck from the Shibushi port directly to the chipping facility. The Shibushi port has the capacity to handle containerized cargo and is equipped with electricity, which would allow the potatoes to remain refrigerated. In addition, the shorter inland travel time would minimize the risk of quality deterioration. In 2014, MAFF completed its technical review and is currently reaching out to its stakeholders to discuss implementation. 

Marketing 

During the first few years following the 2006 market opening, Japanese imports of U.S. fresh potatoes were limited to below 1,000 MT annually, mainly because the Japanese chip manufacturers were not familiar with the quality and characteristics of U.S. fresh potatoes. Working closely with Japanese chip processors, U.S. potato exporters have supplied high quality potatoes, providing suitable potato varieties and successfully meeting the needs of the Japanese manufacturers. As a result, the Japanese industry reports that the rate of rejection for imported U.S. potatoes over the last few years was very small. During MY2010/11 and 2011/12, when Japan’s potato production declined and the yen was strong, U.S. potato imports increased, but they remained flat in MY 2012/13 as the yen weakened and Japan’s domestic production recovered. However, in MY 2013/14, imports from the United States increased due to the decrease in domestic production and the increase in potato chip demand. 

When Japan started importing U.S. fresh potatoes, Japan only imported from the state of California, and only during the months of June and July. Japanese traders looked for additional sources within and beyond the state of California in order to increase the volume of imports from the United States. During the 2011 season, Japan imported stored potatoes (the previous year’s crop) from the state of Washington. Since then, Japanese chip manufacturers have confirmed the quality of stored potatoes and verified that other potato varieties can meet their needs. The U.S. Potato industry has been working with the Japanese chip manufacturers through reverse trade missions and other activities to assist them in testing new potato varieties and expanding their U.S. purchases. These efforts led Japan to begin purchasing stored potatoes from Nevada in 2012. 

Japan’s Imports of Fresh Potatoes (Quantity in MT) HS: 0701.90 

Country

 MY 2009/10

 MY 2010/11

 MY 2011/12

 MY 2012/13

 MY 2013/14

 World

 1,900

 4,310

 16,017

 15,478

 19,854

 United States

 1,899

 4,105

 15,973

 15,478

 19,851

 China

 1

 205

 44

 0

 3

Frozen Potato Products 

Production 

Production of frozen potato products in Japan has been flat in recent years. Frozen potatoes are mainly utilized for frozen French fries and frozen dice cut potatoes, around 8,000 MT each, and both together account for 50 percent of total frozen potato production. Although Post expects Japan’s frozen potato product production to remain stable in the medium term, it is anticipated to decline in the long term as domestic production is expected to shrink due to the retiring of aged farmers. 

Among all frozen food products that Japanese food processors manufacture, in 2013, potato croquettes, which use fresh, frozen, and dehydrated potatoes, ranked as the second largest product in volume after frozen Japanese Udon noodles. Approximately 164,000 MT of potato croquettes are produced annually. It is expected that production of frozen potato croquettes will continue to be steady in years to come given their convenience. 

Consumption 

According to Japanese industry sources, Japanese consumption of frozen potato products is steadily increasing. The majority of frozen potato products are consumed as French fries at fast food restaurants or quick serve restaurants (QSRs), over 300,000 MT annually. Hamburger restaurant chains are by far the largest user of frozen French fries. The largest of these chains consumes almost half of total Japanese imports of frozen French fries by itself. Japanese consumption of frozen potato products is closely tied to the performance of QSRs, and as a result, French fries remain popular as Japanese continue to look for lower-priced meals. 

The sales of freshly-fried potatoes at convenience stores significantly contribute to overall Japanese demand for frozen potato products. They have installed full-size fryers in stores and sell freshly-fried potatoes to consumers. According to the Japan Franchise Association, there are 49,323 convenience stores in Japan (as of December 2013) and many stores sell freshly-fried potatoes at their shops. 

Compared to fried potato products, consumption of non-fried potatoes is still small. However, as Japan’s population ages and the trend in health-conscious diets advances, the demand for non-fried products is expected to increase in the years to come. 

Trade – Imports 

In MY 2013/14, Japanese total imports of frozen potato products (including both French fries, HS 2004.10, and non-fried potatoes, HS 0710.10) were 364,832 MT, a marginal increase (less than one percent) from the previous season. In the long term, as Japan’s potato production is expected to gradually shrink, Post anticipates that imports will steadily grow, given that the overall demand for potatoes continues to be robust. 

Imports of Frozen Potato Products (French fries) – HS 2004.10 (Quantity) 

Country

 MY 2009/10

 MY 2010/11

 MY 2011/12

 MY 2012/13

 MY 2013/14

 World

 310,599

 323,416

 332,528

 335,019

 340,218

 United States

 258,864

 263,197

 275,148

 269,438

 273,988

 Canada

 28,029

 32,454

 31,958

 34,379

 32,148

 Belgium

 13,059

 16,271

 13,440

 16,367

 15,541

 New Zealand

 4,069

 4,045

 4,007

 3,286

 3,732

 Germany

 2,018

 2,568

 2,334

 2,280

 2,384

 Netherlands

 115

 116

 226

 2,727

 6,586

 Others

 4,445

 4,767

 5,414

 6,541

 5,838

Imports of Frozen Potato Products (non-fried potatoes) – HS 0710.10 (Quantity) 

Country

 MY 2009/10

 MY 2010/11

 MY 2011/12

 MY 2012/13

 MY 2013/14

 World

 18,283

 34,386

 30,677

 26,686

 24,614

 United States

 8,910

 25,462

 19,439

 14,991

 14,345

 China

 8,822

 8,232

 10,404

 11,261

 9,918

 Colombia

 180

 264

 333

 285

 221

 Vietnam

 291

 197

 130

 4

 0

 Other

 79

 79

 132

 145

 129

French fries 

Approximately 95 percent of Japan’s frozen potato product imports are French fries (HS 2004.10). In the frozen French fry category, the United States is by far the largest supplier to Japan, supplying approximately 81 percent of total French fry imports during the MY 2013/14 season. Japanese imports of U.S. frozen French fries last year increased by 1.4 percent from the previous season to 273,988 MT. 

Sales of U.S. frozen French fries strongly correlated with sales at Japan’s QSRs, particularly hamburger restaurants. Japan’s QSRs are actively introducing new menu items that strongly encourage French fry sales. For example, French fries and soda are relatively low in cost and are often used as a special promotional draw, such as “large size for the price of small.” When consumer spending is sluggish, these promotions become more aggressive, and with the strong yen, imports of frozen French fries increased during the last decade. However, with the recent combination of a weakened yen and an economy showing signs of the recovery that started at the beginning of 2013, hamburger chains have become less aggressive in these special campaigns, causing a slight decline in imports for the season. During MY 2013/2014, frozen French fries demand has steadily increased in conjunction with increasing sales at Japan’s QSRs. In general, U.S. frozen French fries do not directly compete with domestic potatoes as U.S. potato varieties have less water and sugar content, making them more suitable for making French fries. To maintain their quality, U.S. potatoes have specific temperature and humidity requirements for storage after harvest. In the medium term, with the expected further advance of QSRs and convenience stores serving French fries, imports are expected to grow further. However, in the long term, market growth is expected to slow considerably as the expansion of QSRs and convenience stores hits its limit, and Japan’s population continues to age and shrink. 

Non-fried potatoes 

Japan's imports of non-fried potatoes are primarily for snack food manufacturing and general food processing. Imports grew dramatically in the last decade for two major reasons: 1) the introduction of popular items using U.S. products by major snack manufacturers; and 2) the expansion in the use of Chinese products by foodservice operators. 

As stated above, Japan’s imports of U.S. non-fried potato products are largely supported by Japanese snack food manufacturers who use them to develop new products. U.S. non-fried potato products are processed and frozen in U.S. plants. U.S. potatoes are usually blanched and cut into French fry potato shapes. Then Japanese manufacturers turn them into crispy chips resembling French fries. Other types of U.S. non-fried potato products are blanched and cut into cube shapes in U.S. plants, which the Japanese food service industry then utilizes to prepare various menu items. 

According to Japanese industry sources, as a result of the recovery in the domestic crop in MY 2011/12 and MY 2012/13, a major Japanese snack food manufacturer has increased its use of domestic potato products and reduced its volume of imports from the United States. In MY 2013/14, imports of non-fried potato products continued to decline, with an overall decrease of eight percent, with decreases in imports from China and the United States of 12 and four percent respectively. As stated earlier, Chinese products are primarily destined for the Japanese food service sector where they are mixed with other domestic ingredients. Japanese traders report that, while the unit price of Chinese potatoes has been slowly increasing, it is still cheaper to buy Chinese products compared to other competitors' products, and Chinese potato processers are reportedly fairly adept at meeting the specific needs of Japanese users. As a result, price-attractive Chinese potatoes continue to draw Japanese buyers. . 

Trade – Exports 

In MY 2013/14, Japan only exported 167 MT of frozen potato products to Hong Kong, Taiwan, Singapore, the United States, and Canada for sales through local Japanese grocery stores. 

Market Trends 

Following several decades of slow economic growth, Japanese consumers have become highly price sensitive. The key users of U.S. frozen potato products, such as Japanese QSRs, have been performing well, since Japanese consumers have begun to opt for lower-priced menu items. French fry sales at hamburger chain restaurants grow as hamburger sales go up. Special promotions, such as set menus that come with French fries or allow for larger sizes at a lower price, also enhance sales. U.S. frozen French fry suppliers have earned a good reputation among their Japanese clients, as they are able to provide a high quality product and a steady supply throughout the year. 

As described previously in the Consumption section, sales of French fry potatoes which are fried fresh and served at convenience stores, have been highly successful. 

In 2007, a major Japanese food manufacturer developed snack food products using non-fried U.S. frozen potatoes (HS 0710.10) as an ingredient. U.S. non-fried potato products are processed and frozen in U.S. plants, and then the Japanese manufacturer processes them into crispy chips resembling French fries, marketing them in small cups. The sales of these products have been very successful, and the product development has expanded to include various flavors. With the improvement in the availability of domestic potatoes in 2013, demand for non-fried U.S. frozen potatoes as an ingredient in these particular products declined. However, Japanese manufacturers anticipate that over the long run, this type of utilization will expand beyond the capacity of domestic supplies, and therefore, they expect the use of U.S. frozen potato products to continue growing in the future. 

Non-fried potato products are widely used by the Japanese food service industry. Family restaurants and “Izakaya,” Japanese style pubs, also prepare food menu items using non-fried potato products. The popularity of “sozai” (prepared food available for purchase at supermarkets and department stores) holds great potential for increasing sales of non-fried U.S. frozen potato products. 

The U.S. potato industry has actively expanded its outreach activities to different distribution channels, participating in various trade shows, hosting seminars and events, and promoting fried and mashed potatoes for quick and efficient food preparation at restaurants. It has also demonstrated other types of non-frozen U.S. potato products, such as baked, shredded, sliced, and dice-cut potatoes, in addition to highlighting the cost efficiency and nutritive values of using U.S. frozen potatoes. In addition, the U.S. potato industry has worked with local supermarket chains to successfully develop new deli menu items using U.S. non-fried frozen potatoes. 

The Japanese foodservice industry believes that Japan’s frozen potato product market has good potential to grow. Given Japan’s high quality and food safety standards, the United States remains the best positioned country to supply frozen potato products that meet the needs of Japanese food manufacturers and retailers. Targeting alternative segments in Japan’s food service sector, such as supermarkets, traditional Japanese fast food restaurants, and QSRs holds promise for continued expansion of U.S. sales of frozen potato products in Japan. 

Policy 

Since the last Potato Annual report (October 2013), there have been no major issues relative to U.S. frozen potato products, and Post has observed no trade disruptions of U.S. frozen potato products.