Required Report - public distribution

**Date:** 10/16/2006

**GAIN Report Number:** JA6523

JA6523

**Japan**

**Frozen Potato Products**

**Annual Commodity Report**

**2006**

**Approved by:**

Michael Conlon, Director![](media/image1.wmf), Agricultural Trade Office
Japan

**Prepared by:**

Masayuki (Alex) Otsuka, Specialist, ATO Tokyo

**Report Highlights:**

Japan's imports of frozen potato products increased around 12 percent in
2005/06 (July-June), from 267,895 metric tons (MT) in 2004/05 to 299,327
MT in 2005/06, due to the recovery in the Japanese economy and the
corresponding increase in sales in the food service industry. U.S.
exports to Japan of frozen potatoes in 2005/06 increased by 13.6 percent
from the previous year because of the improving economy and strong sales
by major fast food chains.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Tokyo ATO \[JA2\]

\[JA\]

Table of Contents

[**Executive Summary 2**](#executive-summary)

[Production 3](#production)

[Retail packaged products using domestic potatoes
3](#retail-packaged-products-using-domestic-potatoes)

[Domestic Production & Total Import: Quantity
4](#domestic-production-total-import-quantity)

[Trade 4](#trade)

[Example of non-fry potato products
5](#example-of-non-fry-potato-products)

[Japanese Import of Frozen Potato Products: Quantity (Metric tons)
5](#japanese-import-of-frozen-potato-products-quantity-metric-tons)

[Frozen Potato 5](#frozen-potato)

[Policy 5](#policy)

[Rate of Duty 5](#rate-of-duty)

[Marketing 6](#marketing)

[Price 6](#price)

[PS&D: Production, Supply and Distribution
7](#psd-production-supply-and-distribution)

[Frozen Potato Products Import Trade Matrix
8](#frozen-potato-products-import-trade-matrix)

# 

# Executive Summary

![](media/image2.wmf)

Japan is by far the largest market for U.S. frozen fried potatoes (HS
code 2004.10). Around 41 percent of all U.S. exports went to Japan in
2005. The second largest market for U.S. frozen potato exports is
Mexico, amounting to only 15 percent of all U.S. frozen fried exports.
The United States is also the largest supplier of frozen fried potatoes
to Japan.

The frozen fried potato market is closely tied to the performance of
fast food restaurants and amusement parks in Japan. Sales of frozen
fried potatoes are also impacted by the long vacation seasons in Japan.
Annually, there are three peak periods of demand for frozen fried
potatoes: 1) Golden week in late April and early May; 2) summer vacation
season in late July and August; and 3) The New Year vacation season in
early January.

U.S. exports to Japan of frozen fried potatoes (H.S. code 2004.10)
showed an increase of 13.6 percent in 2005/6 compared to the previous
year. U.S. exports of frozen potatoes increased due to the improving
economy and strong sales by major fast food chains.

With respect to Japanese consumer preferences, a trend of diversified
eating habits among teenagers and younger-aged children are stabilizing
fried potato consumption. On the other hand, the increasing older
population creates demand for developing non-fried frozen potato
products.

Finally, after U.S. suppliers replaced beef tallow with vegetable oil
for pre-cooking fries (in response to BSE) in 2004, the concerns of
Japanese importers were resolved and they are resuming their imports
from the U.S. industry, which already had a reputation of reliability.

# Production

Japan produced 2.7 million tons of fresh potatoes and delivered 2.2
million to the market in 2005, a decrease of 5 percent from the previous
year due to elevated temperatures and drier weather in Hokkaido (the
most northern of Japan's four main islands). Hokkaido produced 86% of
fresh potatoes in the country and most domestic frozen potato products
come from this region.

![](media/image3.wmf)In 2005, domestic production of frozen fried
potatoes increased 3.7 percent from 2004 to 8,687 MT. Production of
non-fried frozen potatoes decreased 0.4 percent to 18,945 tons. Japanese
total production of frozen potatoes increased slightly by 0.9 percent up
in 2005.

Most domestic products went to the retail sector, with sales driven by
consumer cooperative societies (Co-ops) and major manufacturers of
frozen foods, such as Nichirai, Ajinomoto and Nichiro.

Domestic potato products are drawing greater attention from Japanese
users, food manufacturers, retailers and the food service industry
because of food safety concerns related to imported agricultural
products. Japanese domestic production is expected to increase over the
next two to three years because of the increase in demand for
domestically grown potatoes.

## Retail packaged products using domestic potatoes

  ---------------------------------------------------- ----------------------------------------------------
  Nichirei's fried potato product: package describes   Ajinomoto's fried potato product: same sentence on
  the potato made in Hokkaido                          the package

  ![](media/image4.png){width="1.7541666666666667in"   ![](media/image5.png){width="1.5673611111111112in"
  height="1.2166666666666666in"}                       height="1.4083333333333334in"}
  ---------------------------------------------------- ----------------------------------------------------

## Domestic Production & Total Import: Quantity

July through next June: World Trade Atlas

  -------------- -------------- -------------- -------------- --------------
  HS Code        0710.10                                      

  Description    Frozen Potato:                               
                 cooked by                                    
                 steaming or                                  
                 boiling in                                   
                 water                                        

  (Metric Tons)  2003           2004           2005           Change-05/04

  Domestic Pro.  22,239         19,020         18,945         -0.4 %

  Total Import   5,750          6,467          7,275          13.0 %

  Non fry total  27,989         25,487         26,220         3.0 %
  -------------- -------------- -------------- -------------- --------------

  -------------- -------------- -------------- -------------- --------------
  HS Code        2004.10                                      

  Description    Frozen Potato:                               
                 fried potatoes                               
                 including mash                               
                 and other                                    
                 potatoes                                     

  (Metric Tons)  2003           2004           2005           Change-05/04

  Domestic Pro.  6,855          8,375          8,687          3.7 %

  Total Import   233,499        261,975        292,052        11.7 %

  Fried total:   240,354        270,350        300,739        12.5 %
  -------------- -------------- -------------- -------------- --------------

Total Frozen Potato Shipments

  -------------- -------------- -------------- -------------- --------------
  HS Code        0710.10 +                                    
                 2004.10                                      

  Description    Frozen Potato:                               
                 Total Quantity                               
                 (tons) and                                   
                 Share (%)                                    

                 2003           2004           2005           Change-05/04

  Total: tons    268,343        295,837        326,959        10.5 %

  Total share: % 100.0 %        100.0 %        100.0 %        \-

  0710.10 Dome.  8.3 %          6.4 %          5.8 %          -9.4 %

  0710.10 Import 2.1 %          2.2 %          2.2 %          0 %

  2004.10 Dome.  2.6 %          2.8 %          2.7 %          -3.6 %

  2004.10 Import 87.0 %         88.6 %         89.3 %         7.9 %
  -------------- -------------- -------------- -------------- --------------

# Trade

Total Japanese frozen fried potato (HS 2004.10) imports from the United
States in 2005/06 increased by 11.7 percent to 234,093 tons. The
increase in U.S. exports to Japan, which climbed 13.6 percent from the
previous year, benefited from an improvement in the Japanese economy and
robust sales of fast food restaurants.

Pub dining chains also have increasingly used imported frozen fried
potatoes because of the popularity of the product with younger
consumers. In addition, a small but growing trend is Japanese
convenience stores selling a variety of fried potato products similar to
those in fast food outlets. Major U.S. frozen potato manufacturers with
representatives based in Japan were instrumental in generating this
trend.

Imports of non-fry frozen potatoes (HS 0710.10) also increased by 13
percent in 2005/06. The Japanese food service industry used imported
frozen potatoes instead of domestically produced fresh vegetables. Fresh
vegetables were extremely expensive in 2005 due to heavy rains during
harvest season.

Japanese manufactures are also developing products with a healthier
image. Older Japanese consumers are becoming more concerned with
cholesterol levels associated with any fried product as well as with
weight gain. Retail buyers are seeking new food items to appeal to
consumers' interest in healthier food, with Chinese products principally
filling this market niche.

## Example of non-fry potato products

  ----------------------------------------------------- ----------------------------------------------------- -----------------------------------------------------
  Chinese made frozen cut potatoes                      Chinese made small size potatoes                      Chinese made mashed potatoes

  ![](media/image6.jpeg){width="1.6611111111111112in"   ![](media/image7.jpeg){width="1.7666666666666666in"   ![](media/image8.jpeg){width="1.6708333333333334in"
  height="1.1465277777777778in"}                        height="1.1493055555555556in"}                        height="1.167361111111111in"}
  ----------------------------------------------------- ----------------------------------------------------- -----------------------------------------------------

## Japanese Import of Frozen Potato Products: Quantity (Metric Tons) 

July through June: World Trade Atlas

+---------+-------+-------+-------+-----+-------+------+-------+-----+
| ##      | **F   |       |       |     | **N   |      |       |     |
| Frozen  | ried, |       |       |     | on-Fr |      |       |     |
| Potato  | m     |       |       |     | ied** |      |       |     |
|         | ashed |       |       |     |       |      |       |     |
|         | and   |       |       |     | **(HS |      |       |     |
|         | ot    |       |       |     | 0710. |      |       |     |
|         | her** |       |       |     | 10)** |      |       |     |
|         |       |       |       |     |       |      |       |     |
|         | **(HS |       |       |     |       |      |       |     |
|         | 2004. |       |       |     |       |      |       |     |
|         | 10)** |       |       |     |       |      |       |     |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| Country | **200 | **200 | **Cha | **S | **200 | **   | **Cha | **S |
|         | 4/5** | 5/6** | nge** | har | 4/5** | 2005 | nge** | har |
|         |       |       |       | e** |       | /6** |       | e** |
|         |       |       | **06/ |     |       |      | **06/ |     |
|         |       |       | 05%** | **  |       |      | 05%** | **  |
|         |       |       |       | %** |       |      |       | %** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| World   | *     | *     | **1   | **1 | **6,  | *    | **    | **1 |
| Total   | *261, | *292, | 1.7** | 00. | 436** | *7,2 | 5.7** | 00. |
|         | 459** | 052** |       | 0** |       | 75** |       | 0** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| U.S.A.  | *     | *     | **1   | **  | **    | *    | **57  | **  |
|         | *206, | *234, | 3.6** | 80. | 201** | *1,3 | 3.1** | 18. |
|         | 033** | 093** |       | 2** |       | 54** |       | 6** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| Canada  | **42, | **44, | **    | **  | **    | **1  | **-1  | *   |
|         | 946** | 328** | 3.2** | 15. | 129** | 03** | 9.9** | *1. |
|         |       |       |       | 2** |       |      |       | 4** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| China   | **1,  | **3,  | **13  | *   | **5,  | *    | **-   | **  |
|         | 649** | 899** | 6.5** | *1. | 763** | *5,3 | 8.0** | 72. |
|         |       |       |       | 3** |       | 01** |       | 9** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| Belgium | **2,  | **2,  | **2   | *   | **0** | *    | *     | **  |
|         | 377** | 938** | 3.6** | *1. |       | *3** | *NA** | -** |
|         |       |       |       | 0** |       |      |       |     |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| New     | **3,  | **3,  | **-1  | *   | **3** | *    | *     | **  |
| Zealand | 992** | 350** | 6.1** | *1. |       | *0** | *NA** | -** |
|         |       |       |       | 1** |       |      |       |     |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| Germany | **3,  | **2,  | **-2  | *   | Col   | **3  | **2   | *   |
|         | 472** | 610** | 4.8** | *0. | ombia | 08** | 1.5** | *4. |
|         |       |       |       | 9** |       |      |       | 2** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+
| Neth    | **    | **    | **1   | *   | Vi    | **1  | *     | *   |
| erlands | 657** | 747** | 3.6** | *0. | etnam | 47** | *75** | *2. |
|         |       |       |       | 3** |       |      |       | 0** |
+---------+-------+-------+-------+-----+-------+------+-------+-----+

# Policy

No significant change in these tariff code numbers

+-------+-----------+------------------------------------+-------------+
| HS    |           | Description                        | ### R       |
| Code  |           |                                    | ate of Duty |
+-------+-----------+------------------------------------+-------------+
| 07    | 07        | Frozen Potatoes: uncooked or       | 8.5 %       |
| 10.10 | 10.10-000 | cooked by steaming or boiling in   |             |
|       |           | water                              |             |
+-------+-----------+------------------------------------+-------------+
| 20    | 20        | Frozen Potatoes: Cooked, not       | 8.5 %       |
| 04.10 | 04.10-100 | otherwise prepared (fried          |             |
|       |           | potatoes)                          |             |
+-------+-----------+------------------------------------+-------------+
|       | 20        | Frozen Potatoes: Mashed potatoes   | 13.6 %      |
|       | 04.10-210 |                                    |             |
+-------+-----------+------------------------------------+-------------+
|       | 20        | Frozen Potatoes: Other             | 9 %         |
|       | 04.10-220 |                                    |             |
+-------+-----------+------------------------------------+-------------+

Japan implemented two new regulations in 2006 related to the importation
of frozen potato products. The first regulation is on the maximum
residue level (MRL) on all food products, which was implemented on May
29, 2006. For information on MRLs, which may affect frozen potato
products, please see the following website

<http://www.mhlw.go.jp/english/topics/foodsafety/positivelist060228/introduction.html>

and GAIN reports JA6004, JA6011, JA6025, JA6030.

The other regulation involves the importation of rice and rice products.
Starting in August, 2006, the Japanese government implemented new
biotech testing requirements for rice, which is often used as an
ingredient in processed potato products.

For information about other Japanese food safety information, including
food additives, please see the following website:
<http://www.mhlw.go.jp/english/topics/foodsafety>.

# Marketing

Japan has one of the most effective infrastructures in the world for
distribution, handling and storage of all frozen products. Japan's
infrastructure, which can accommodate the handling of frozen potato
products, provides easy access for foreign competitors. In fact, around
30 countries exported frozen potato products to Japan last year.

Based on this infrastructure, population dynamics and increasingly
favorable macroeconomic trends in the country, the food industry
believes that Japan has a potential market capacity of more than 300,000
metric tons for frozen fried potatoes. The United States is in the best
position to fulfill this anticipated market potential, although many
other third-country competitors and some domestic Japanese producers are
seeking every opportunity to increase market share.

# Price

Import prices dramatically increased in 2005/06, up 10 percent (or 4 to
5 cents/pound) from 2004/05. This increase was due to the surge in
petroleum prices and the rise in the price of domestic potatoes, which
suffered from a crop shortage.

# PS&D: Production, Supply and Distribution

  --------------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- ---------
  **Country**     **Japan**                                                                                              

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

                  2004        Revised                2005       Estimate               2006       Forecast               UOM

                  USDA\       Post\      Post\       USDA\      Post\      Post\       USDA\      Post\      Post\        
                  Official    Estimate   Estimate\   Official   Estimate   Estimate\   Official   Estimate   Estimate\   
                                         New                               New                               New         

  **Market Year               07/2004    07/2004                07/2005    07/2005                07/2006    07/2006     MM/YYYY
  Begin**                                                                                                                

                                                                                                                          

  Beginning       0           0          0           0          0          0           248,600    0          0           (MT, Net
  Stocks                                                                                                                 Weight)

  Production      27,395      27,395     27,395      28,500     27,632     27,632      0          28,000     28,000      (MT, Net
                                                                                                                         Weight)

  Imports         216,848     267,895    267,895     220,600    299,327    299,327     0          301,000    301,000     (MT, Net
                                                                                                                         Weight)

  Total Supply    244,243     295,290    295,290     249,100    326,959    326,959     0          329,000    329,000     (MT, Net
                                                                                                                         Weight)

  Exports         653         276        276         500        309        309         0          330        330         (MT, Net
                                                                                                                         Weight)

  Domestic        243,590     243,590    243,590     248,600    326,650    326,650     0          328,670    328,670     (MT, Net
  Consumption                                                                                                            Weight)

  Ending Stocks   0           0          0           0          0          0           0          0          0           (MT, Net
                                                                                                                         Weight)

  Total           244,243     243,866    243,866     249,100    326,959    326,959     0          329,000    329,000     (MT, Net
  Distribution                                                                                                           Weight)
  --------------- ----------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- ---------

(Total of HS 0710.10 and HS code 2004.10)

# Frozen Potato Products Import Trade Matrix

  --------------------- ------------- -------------------- ---------------
  **Country**           Japan                              

  **Commodity**         Potato                             
                        Products,                          
                        Frozen                             

  Time Period           Jul - Jun     Units:               Metric Ton

  Imports for:          2004                               **2005**

  U.S.                  206,234       U.S.                 235,447

  Others                              Others                

  Canada                43,075        Canada               44,431

  China                 7,412         China                9,200

  Belgium               2,377         Belgium              2,941

  New Zealand           3,995         New Zealand          3,350

  Germany               3,472         Germany              2,610

  Netherlands           657           Netherlands          747

                                                            

                                                            

                                                            

                                                            

  Total for Others      60,988                             63,279

  Others not Listed     673                                601

  Grand Total           267,895                            299,327
  --------------------- ------------- -------------------- ---------------