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Required Report - public distribution

**Date:** 12/18/2003

**GAIN Report Number:** JA3082

JA3082

**Japan**

**Frozen Potato Products**

**Annual**

**2003**

**Approved by:**

![](media/image1.wmf)Kevin Sage-El and Kevin Latner

U.S.Embassy

**Prepared by:**

Masayuki Otsuka and Kenzo Ito

**Report Highlights:**

Japan's imports of frozen fried potatoes have decreased slightly since
1999, from 232,500 tons to 220,800 tons in 2002. Year to date has seen a
more significant drop, however. The recent increase in health-oriented
food habits in Japan has hurt consumption of frozen fried potatoes
significantly. Japan's fast food restaurant chains, the largest user of
frozen fried potatoes, now offer more options than just fried potatoes.
Japan's cool summer in 2002 also reduced the consumption of fried
potatoes at amusement parks. The United States lost market share
slightly in 2002, to Canada, New Zealand, Australia and China. Japanese
production of frozen fried potatoes is fairly small, accounting for
approximately 3 percent of the total market.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Tokyo \[JA1\]

\[JA\]

Table of Contents

[**Overall Decline Due To Health-Oriented Consumer Habits
3**](#overall-decline-due-to-health-oriented-consumer-habits)

[The Impact on U.S. Trade 3](#the-impact-on-u.s.-trade)

[Japanese Domestic Production 4](#japanese-domestic-production)

[Import Duties 4](#import-duties)

[PS&D Tables and Trade Matrices 5](#psd-tables-and-trade-matrices)

[Frozen Fried Potato PS&D Table 5](#frozen-fried-potato-psd-table)

[Frozen Fried Potato Import Trade Matrix
6](#frozen-fried-potato-import-trade-matrix)

# Overall Decline Due To Health-Oriented Consumer Habits

![](media/image2.wmf)Japan's imports of frozen fried potato have
declined slightly since 1999, from 232,500 tons to 220,800 tons in 2002.

The most recent statistics for total frozen potato imports, January
through September 2003, show a drop of 10.2% in imports to 174,670 tons,
compared to the same period the previous year, a decline in value of
14.0% to JPY 18.6 billion. The U.S. exported 137,377 metric tons, a drop
of 13.2%. Canada, the second largest exporter, also experienced a
decline of 26,946 tons, a decline of 8.0%.

With increasingly health-conscious consumers, Japanese fast food chains
are turning to healthy menus. McDonald started a new service called "Mac
Choice," for their customers to choose one side order from four options:
fried potato, cup salad, pancake, and chicken nuggets. This selection
has led to a decline in McDonald's potato usage of approximately 16%.
McDonald's overall sales have been sluggish for last 12 months, and
forecasts further decline.

The convenience store industry is also decreasing its use of fried
potatoes. The convenience store industry is developing a diversified
fast food menu at their stores in order to meet consumer demands. In
place of the potato, Italian style hot sandwiches, Chinese style dim
sum, and traditional Japanese snacks are increasingly available.

This year, Japan's cool summer reduced travel and attendance at
recreational facilities during the vacation season, reducing fried
potato consumption at amusement facilities, a major user of fried
potatoes.

# The Impact on U.S. Trade

While the U.S. is still the largest supplier to the Japanese market,
U.S. market share is declining. Market share is down from an 84.6% in
2000 to 82.0% in 2002, representing about 180,000 metric tons. Canada,
New Zealand, Australia, among others, gained market share during this
period.

Japan's concern for GM potato is one reason why Canada, New Zealand and
Australia are exporting more potatoes to Japan. The number two Japanese
hamburger chain, MOS Burger, has switched to sourcing its potatoes from
Canada and Australia, due to GM concerns.

China also exported more potato to Japan in 2002. Cheap labor allows
China to offer potatoes with uniform length, and will remove all black
spots/blemishes from the potatoes. Importers can push their costs down
by sourcing from China, Australia and Canada.

# Japanese Domestic Production

![](media/image3.wmf)Japanese production of frozen fried potatoes has
been declining yearly, due largely to higher production cost in Japan.
In 2002, total production was 6,527 metric tons, down approximately 17
percent from the previous year. Domestic frozen fried potatoes were
almost twice as expensive as imports. The average price of domestic
products was \$1.64 (180 yen) per kilogram (FOB at Japanese
manufacturer) in 2002, while the average price of imported products was
\$0.84 per kilogram (CIF). The domestic product market share was
approximately 3 percent.

# Import Duties

These duties are not subject to further reductions outside of the next
round of WTO negotiations. The applicable import duties are as follows:

+-------------------+------------------------------------+-------------+
| Tariff Code       | Description                        | Duty Rate   |
|                   |                                    |             |
| (HS)              |                                    |             |
+-------------------+------------------------------------+-------------+
| 2004.10-100       | Frozen Potatoes - cooked not       | 8.5 %       |
|                   | otherwise prepared                 |             |
+-------------------+------------------------------------+-------------+
| 2004-.10-220      | Frozen Potatoes - other            | 9.0 %       |
+-------------------+------------------------------------+-------------+

All duties are charged on a CIF basis.

# PS&D Tables and Trade Matrices

## Frozen Fried Potato PS&D Table

  ----------------- ------------ ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                              

  **Country**       **Japan**                                                

  **Commodity**     **Frozen                                      (MT)(MT,   
                    Potato                                        Net        
                    Products**                                    Weight)    

                    2001         Revised    2002       Estimate   2003       Forecast

                    USDA         Post       USDA       Post       USDA       Post
                    Official     Estimate   Official   Estimate   Official   Estimate
                    \[Old\]      \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                  07/2001               07/2002               07/2003
  Begin**                                                                    

  Deliv. To         0            20000      0          20000      0          20000
  Processors                                                                 

  Beginning Stocks  0            0          0          0          0          0

  Production        7888         7888       7500       6527       0          5500

  Imports           266556       220891     260660     204856     0          200000

  TOTAL SUPPLY      274444       228779     268160     211383     0          205500

  Exports           0            0          0          0          0          0

  Domestic          274444       228779     268160     211383     0          205500
  Consumption                                                                

  Ending Stocks     0            0          0          0          0          0

  TOTAL             274444       228779     268160     211383     0          205500
  DISTRIBUTION                                                               
  ----------------- ------------ ---------- ---------- ---------- ---------- ----------

## Frozen Fried Potato Import Trade Matrix 

  -------------------- ---------------- ------------------ ----------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**          Japan                               

  **Commodity**        Frozen Potato                       
                       Products                            

  Time Period          Jan.-Dec.        Units:             Metric Tons

  Imports for:         2001                                **2002**

  U.S.                 190712           U.S.               181076

  Others                                Others             

  Canada               31537            Canada             35517

  New Zealand          1557             New Zealand        2074

  Netherlands          1079             Netherlands        1140

  Belgium              190              China              346

  China                285              Belgium            127

  Italy                433              Italy              277

  Egypt                122              Australia          161

                                        Egypt              65

                                                            

                                                            

  Total for Others     35203                               39707

  Others not Listed    58                                  51

  Grand Total          225973                              220834
  -------------------- ---------------- ------------------ ----------------