Current Outlook of Japanese

May 2017 [ I n d e x ]

1. Characteristics of tea production in ………………………………………………………………………….………………………….1 2. Outlook of tea production…………………………………………………………………………………………...…….………………………….3 3. Outlook of crude tea price………………………………………………………………………………………………....…….…………...……..4 4. Outlook of consumption/demand of tea…………………………………………………………………………....………………………...5 5. Outlook of tea import/export………………...... …………………………………………………………………………………….....6 6. Tea replanting……..………………………………………………………………………………………..……………………………………………....7 7. Act on Promotion of Tea Industry…………………………………………………………………..…………………………………………..….8 1.機密性○情報 Characteristics of tea production in Japan ○○限り ○ Tea undergoes the following processes before being sold on the market: (i) harvesting fresh leaf, (ii) processing fresh leaf into crude tea in tea-growing regions, and (iii) blending crude tea into final processed tea (refined tea) in tea consumption regions. The industrial scale of crude tea is about JPY100 billion. ○ Major tea-growing regions are: (1) , (2) Kagoshima, (3) Mie, (4) and (5) Fukuoka. The top-three prefectures constitute about 70% of the total tea-growing acreage in Japan. ○ Tea production in each prefecture has different characteristics, for example, Shizuoka, Kagoshima and Miyazaki mainly produce "," Mie and Fukuoka "Kabusecha," Saga and Kumamoto "Tama-ryokucha," and Kyoto "" and "." ○ Change of form of tea and industrial scale ○ Main tea-producing prefectures and characteristics of production

Prefecture 2016 Tea- Rank growing Acreage Characteristics of production name Fresh leaf (in ha) 1 Shizuoka 17,400 Mainly produces Sencha (in particular, deep-steamed Sencha) 2 Kagoshima 8,520 Mainly produces various types of Sencha Steaming/rolling/Drying 3 Mie 3,000 Japan's largest producer of Kabusecha 4 Kyoto 1,580 Japan's largest producer of Gyokuro and Matcha JPY95.2 billion 5 Fukuoka 1,550 Mainly produces Kabusecha Crude tea Source: 2014 Statistics of Agricultural Income 6 Miyazaki 1,420 Mainly produces Sencha Crude tea (non-trimmed tea 7 Kumamoto 1,350 Japan's third largest producer of Tama-ryokucha leaf, before removing stems) 8 Saitama 884 Mainly produces Sencha Blending several types of crude 9 Saga 866 Japan's largest producer of Tama-ryokucha tea produced in different regions 10 Nagasaki 750 Mainly produces Tama-ryokucha

2016 Tea- 2016 Tea- 2016 Tea- Refined tea Prefecture Prefecture Prefecture Refined tea (trimmed tea, after Rank growing Rank growing Rank growing Acreage name name Acreage (in ha) name (Seicha) removing stems) Acreage (in ha) (in ha) 11 Gifu 734 15 Oita 446 19 Tokushima 249 12 Nara 706 16 Kochi 392 20 Chiba 194 13 Shiga 614 17 Ibaraki 353 - All prefecture 43,100 Tea for 14 Aichi 542 18 Kanagawa 257 total drinking Source: MAFF "Statistics on Farmland and Crop Acreage" 1 (Reference) Types of tea

Types Characteristics and main producing regions Percentage of crude tea production/crude tea price (2015) [Characteristics] [Percentage of Production] • Most popular type of tea 58.6% Sencha Processed by steaming, kneading and drying new shoots. [Crude Tea Price] [Main Production Regions] JPY1,302/kg • All regions in Japan [Characteristics] [Percentage of Production] • Cultivated under a sun-shielding covering made of straw or cheesecloth 0.3% Gyokuro under “tana” (ceiling shelf) for about 20 days before harvesting. Processed in [Crude Tea Price] the same way as Sencha. JPY5,462/kg [Main Production Regions] • Kyoto and Fukuoka [Characteristics] [Percentage of Production] • Cultivated under a sun-shielding covering made of straw or cheesecloth for 5.4% Kabusecha about one week before harvesting. Processed in the same way as Sencha. [Crude Tea Price] [Main Production Regions] JPY1,552/kg • Mie and Fukuoka [Characteristics] [Percentage of Production] • Cultivated under a sun-shielding covering from three weeks to one month 2.8% Tencha before harvesting (which is longer than that of Gyokuro). Processed by drying [Crude Tea Price] (Matcha) tea leaf without kneading. JPY3,134/kg • Matcha is a powdered tea made by grinding Tencha with a stone mill. [Main Production Regions] • Kyoto and Aichi [Characteristics] [Percentage of Production] Tama- • Unlike Sencha, a trimming process is not applied to Tama-ryokucha so Tama- 2.8% ryokucha leaf is round. [Crude Tea Price] ryokucha [Main Production Regions] JPY1,644/kg • Kumamoto, Saga and Nagasaki

Source: Percentage of crude tea production/crude tea price (for all crop seasons) is based on data from the Japanese Association of Tea Production. Reference: Gyokuro, Kabusecha and Tencha are collectively called "Ooicha." 2 2. Outlook of tea production ○ Growing acreage is declining slowly. ○ After picking up in 2004 when the production volume exceeded 0.1 mil. tons due to increased demand in beverages, tea production volume has been on a decline. In recent years, production volume is around 0.08 mil. tons a year. ○ Commercial tea farm are expanding the scale of tea production acreage, especially in . ○ Change in growing acreage per commercial tea farm in major tea- producing prefectures ○ Change in tea growing acreage/production volume (ha)

Shizuoka Kagoshima Mie Kyoto Fukuoka Miyazaki Kumamoto Growing acreage ha)(in1,000 120 60 生産量Production volume 面積Growing acreage 2000 0.7 1.5 0.5 0.9 0.5 1.2 0.6 50 50 49 49 49 48 48 2005 100 47 47 46 50 0.8 2.1 0.9 1.1 0.8 1.7 0.8 46 45 45 44 43 2010 1.0 3.0 1.3 1.3 0.9 2.2 1.1 80 40 101 2015 1.3 4.7 1.7 1.7 1.2 3.0 1.2 100 92 94 96 92 88 Source: Census of Agriculture and Forestry; the growing acreage of commercial tea farm in 60 84 86 85 84 84 80 30 2010 is an estimate. 85 80 Production volume (in 1,000 (in tons) volume Production ○ Change in number of commercial tea farm in major tea-producing 40 20 prefectures

All Shizuoka Kagoshima Mie Kyoto Fukuoka Miyazaki Kumamoto prefecture 20 10 total

2000 24,019 4,309 4,598 1,330 2,217 820 1,277 53,687 0 0 200214 200315 200416 200517 200618 200719 200820 200921 201022 201123 201224 201325 201426 201527 201628 2005 17,731 3,072 2,294 1,035 1,629 642 973 37,617

Source: MAFF "Statistics on Agricultural Production"; 2016 production 2010 13,933 2,216 1,455 825 1,385 513 695 28,116 volume is a preliminary data. 2015 9,504 1,599 941 631 962 373 512 19,603

Source: Census of Agriculture and Forestry 3 3. Outlook of crude tea price

○ Tea price was on an upward trend until 2004 due to increased demand in PET-bottle green tea beverages; however, after 2004, slowdown in demand is pushing the crude tea price downward. ○ Tea price significantly differs depending on (i) price differences between types of tea and (ii) price differences between crop seasons, in addition to tea quality, significant affecting tea farmers.

○ Change in tea price (crude tea and regular Sencha) ○ Change in tea price per crop season (Crude tea JPY/kg produced in 2015) Unit: JPY/kg 3,500 Other Ichibancha Ooicha Sencha type of Nibancha green Sanbancha Tama- 3,000 Gyokuro Kabusecha Tencha Sencha Average for all tea harvesting season ryokucha tea 2,500 First crop of tea 5,462 1,900 3,995 1,994 2,053 489 1,364 2,000 Second － crop of tea 845 1,921 671 772 326 691 1,500 Third crop － － of tea 683 405 454 318 279 1,000 Autumn- winter － － － 342 － 287 387 500 Bancha Average for all crop 5,462 1,552 3,134 1,302 1,644 318 700 0 season 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Data from the Japanese Association of Tea Production Source: Data from the Japanese Association of Tea Production

(Reference) Change in price of import Chinese green tea Unit: JPY/kg 2009 2010 2011 2012 2013 2014 2015 2016 245 252 261 285 382 476 582 520

Source: Ministry of Finance, Trade Statistics (CIF price) 4 4. Outlook of consumption/demand of tea ○ Consumption volume of green tea (leaf tea), which had been on a declining trend, has recently remained unchanged. PET-bottle green tea beverage product is on an increase. ○ The total of annual expenditure per household of green tea (leaf tea) and tea beverage product is about JPY10,000; however, the amount of expenditure of tea beverage product has come to exceed that of tea leaf, showing a consumer shift to a more convenient style of tea consumption. ○ On the other hand, the consumption volume of soda and water has been increasing. ○ Change in consumption volume of leaf tea per household (g) ○Amount of annual expenditure for green tea leaf/tea 1,200 beverage product per household 1,140g 1,000 856g 800 緑茶Green tea (leaf tea) 茶飲料Tea beverage product (JPY) 600 12,000 400 10,559 10,831

200 10,000 5,749 6,635 0 4,464 142002年 152003年 162004年 172005年 182006年 192007年 202008年 212009年 222010年 232011年 242012年 252013年 262014年 272015年 282016年 8,000 Source: Ministry of Internal Affairs and Communications, Household Statistics ○ Change in consumption volume of soft drinks 29.3 30.0 6,000 Soda 6,095 5,378 25.0 beverage 23.9 4,000 23.4 4,196 20.0 20.5 Green Tea Beverage 2,000 In 2015, consumption 15.0 volume of green tea- Mineral water beverage product 10.0 beverage reached a record-high. 0 volume volume per person(liter/person) 142002年 152003年 162004年 172005年 182006年 192007年 202008年 212009年 222010年 232011年 242012年 252013年 262014年 272015年 282016年 7.5 5.0 5.3 tea beverage From 2007, amount of expenditure for tea beverage product exceeds nsumption 0.0 that of green tea leaf.

Co 200113年200214年200315年200416年200517年200618年200719年200820年200921年201022年201123年201224年201325年201426年201527年 Source: Ministry of Internal Affairs and Communications, Household Statistics 5 Source: Japan Soft Drink Association 5. Outlook of tea import/export

○ Surged in 2004 due to green tea beverage materials demand, tea import turned to decline as percentage of domestic tea increased, decreasing to only 20% in ten years. ○ Thanks to growing enthusiasm for Japanese food and health awareness in foreign countries including the U.S., export volume saw a four-fold increase in ten years. The U.S. accounts for about 40% of Japanese tea exports. ○ In 2016, green tea export value increased from 2015 by 14%.

○ Major countries importing tea from Japan (top five countries/regions, 2016) ○ Change in import/export of green tea (Volume of export from Japan by country)

U.S. (in tons) 26% Taiwan 20,000 35% Singapore 4% Germany 15,000 Export volume (t) 8% Canada Import volume (t) 8% 19% 10,000 Other countries 4,127 2,387 2,942 4,108 ○ Major countries exporting tea to Japan (top 5,000 1,096 1,625 1,958 3,516 1,701 2,232 2,351 five countries/regions, 2016) 599 762 760 872 1,576 (Volume of import to Japan by country) 0 1% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1% 3% 1% 5,000 3,473 4,875 4,180 3,618 5,865 5,393 8% Australia 7,326 5,906 5,473 10,000 Vietnam 10,242 9,591 11,790 11,254 Myanmar 15,000 15,187 Brazil 17,739 20,000 16,995 85% Other countries

Source: Ministry of Finance, Trade Statistics (data for (Source: Ministry of Finance, Trade Statistics) the period from January to December FY2016) 6 6. Tea replanting

○ About 30% of trees of tea fields are aged 30 years or older, raising concern about decline in yield and quality. ○ "Yabukita" accounts for more than 70% of all varieties of tea grown in Japan, resulting in concentration of the tea plucking season. In consequence, negative impacts have arisen, such as concentration of crude works, quality degradation due to delayed plucking, and damaging distinctive characteristics of tea flavor. ○ To address these issues, a program has been in place from FY2011 to support tea farmers in replanting tea trees.

○ Farm acreage categorized by tree age (FY2011) ○ Farm acreage categorized by tea cultivar (ha) native Kanayamidori, Asatsuyu, 10,000 variety, 2% Others, 8% 1% 1% 33% Sayamakaori, 8,000 2% 22% Okumidori, 6,000 20% 3% 13% Saemidori, 4,000 3% 11% Yabukita, 2,000 Yutakamidori, 74% 6%

0 Farm未成園 with -～1010years年 1111-～2020years年 2121-～30 30years年 30年以上years or immature trees older Source: MAFF survey Source: MAFF survey (FY2015)

○ Significance and advantages of replanting • Planting young tea trees can improve quality and productivity (for a tea field with old trees, tea quality and yield is declining due to aging of root systems and decline in the /moisture preserving ability of soils). • Planting good cultivar makes it possible to enhance added value and create new demands. • Combining varieties with different crop seasons can mitigate weather and natural disaster risk and avoid concentration of harvesting and processing work. 7 （参考）7. Act on Promotion of Tea Industry and ○ "Act on Promotion of Tea Industry and Tea culture" came into effect on April, 2011.

1. Purpose of Act The purpose of this Act is to provide for the development of basic policies by the Minister of Agriculture, Forestry and Fisheries, and to take various measures such as securing stable business management of tea producers, expanding consumption, promoting food education using tea to contribute to such consumption, promoting export and disseminating knowledge on tea tradition, so as to contribute to the achievement of sound development of tea industry and healthy and affluent lives of nationals. 2. Summary of Act (1) Development of basic policy (Article 2) The Minister of Agriculture, Forestry and Fisheries shall provide for a basic policy on the following matters: (i) significance and basic policy for tea industry and promotion of tea culture; (ii) setting a target for production quantities according to long-term perspective on tea demands; (iii) measures for the promoting tea industry; (iv) measures for the promotion of tea culture; and (v) any other matters necessary for the promotion of tea industry and tea culture. (2) Development of promotion plans (Article 3) Prefectures shall make an effort to develop the promotion plan in accordance with the basic policy. (3) Assistance measures by the national and local governments (Articles 4 through 10) The national and local governments shall make an effort to implement the assistance measures in relation to the following matters: (i) securing stable business management of tea producers (e.g. improving environment of tea fields, assistance in replanting of tea trees and promotion of disaster prevention); (ii) improvement of processing and distribution (assistance for projects for creating new added value through integral collaboration of agriculture, manufacturing, retail and other sectors) (iii) promotion of quality improvement; (iv) promotion of consumption; (v) promotion of export; (vi) promotion of tea culture; and (vii) commendation of contributors to tea industry and tea culture. (4) Assistance of national government (Article 11) The national government must make an effort to implement necessary measures such as providing information, advice and financing to local governments. 8