United States

Department

of Agriculture

www.ers.usda.gov

Electronic Outlook Report from the Economic Research Service

SSS-234-01

September 2002

Sweetener Policies in Japan

Abstract

Japan’s policies affecting caloric sweeteners (sugar, corn syrup, etc.) protect high-cost

domestic production of sugarcane and sugarbeets against foreign competition. A complicated set of policies uses mandatory levies on imports of raw sugar and general budget

funds to subsidize processors of domestic sugar for the high cost of domestic cane and

beets. The focus of government efforts is moving away from market price stabilization

policies toward support for domestic production that minimizes the impact of government policies on consumer prices. However, government interventions such as control

over the amount of raw sugar imports, prohibitive duties on refined sugar imports, high

tariffs on imported products that contain sugar as an ingredient, and quotas, tariffs, and

other controls on sugar substitutes remain in place. These interventions continue to

impose higher prices on consumers, to limit Japan’s imports of sugar and other sweeteners, and to distort economic activity within Japan. 

Keywords: Japan, sugar, sweeteners, high-fructose corn syrup, policies, domestic 

support, state trading, trade, trade liberalization.

Acknowledgments

The authors gratefully acknowledge the reviews of Stephen Haley, David Skully,

Praveen Dixit, and Joy Harwood of ERS; Suzanne Hale, Casey Bean, and Robert Knapp

of FAS; John Love of the World Agricultural Outlook Board; and Won Koo of North

Dakota State University. Excellent support was provided by the editor, Martha Evans,

and by the designer, Wynnice Pointer-Napper.

Hisao Fukuda, John Dyck, and Jim Stout1

1Hisao Fukuda works in the Foreign Agricultural Service (FAS) of USDA in Tokyo. John Dyck and Jim Stout

work in the Economic Research Service (ERS) of USDA. This article is a joint project of FAS and ERS.
Japan is one of the leading agricultural importing

nations in the world. This article is one in a series

examining Japan’s policies that protect and regulate its

agricultural markets. These policies are of special

interest because they are subject to review in the current round of global trade negotiations conducted by

the World Trade Organization. 

Japan has far-reaching policies that affect caloric

sweeteners (sugar, corn syrup, etc.) because it wishes

to protect high-cost domestic production of sugarcane

and sugarbeets against foreign competition. Sugarbeets

are raised in the northernmost large island, Hokkaido,

while sugarcane is grown in southernmost Japan, on

small islands south of Kyushu, extending to Okinawa.

Sugar production is about 800,000 tons, with sugar

consumption about 2.3 million tons, and total supply

of sweeteners about 3.9 million tons (see fig. 1). A

large industry producing high-fructose corn syrup

(HFCS) from imported corn and domestic potato and

sweet potato starch has evolved since 1977. Corn from

the United States has been the main feedstock for producing HFCS in Japan, and, at a level of 3 million tons

a year, Japan’s imports of corn for HFCS are about 20

percent of its total corn imports. 

A complicated set of policies uses mandatory levies on

imports of raw sugar and general budget funds to subsidize processors of domestic sugar for the high cost

of domestic cane and beets. Japan’s Government has

recently tried to adjust policies to allow consumer

prices to fall to levels closer to world trade prices. The

focus of government efforts is moving away from market price stabilization policies toward support for

domestic production that minimizes the impact of government policies on consumer prices. However, government interventions such as control over the amount

of raw sugar imports, prohibitive duties on refined

sugar imports, high tariffs on imported products that

contain sugar as an ingredient, and quotas, tariffs, and

other controls on sugar substitutes remain in place.

These interventions continue to impose higher prices

on consumers, to limit Japan’s imports of sugar and

other sweeteners, and to distort economic activity

within Japan.2

2 Economic Research Service, USDA

Introduction

1964 70 76 82 88 94 2000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Figure 1

Sugar: Production, consumption, and trade

in Japan

1,000 metric tons

Consumption

Source: USDA, PS&D, 12/11/01.

Imports

Production

Stocks

2 For a discussion of U.S. sugar policies, see

http://www.ers.usda.gov/briefing/sugar/policy.htm
Sugar. Farmers receive a guaranteed minimum price

for cane or beet. The Ministry of Agriculture, Forestry,

and Fisheries (MAFF) sets this price each year,

according to the Sugar Price Stabilization Law of

1965, and the Revised Sugar Price Adjustment Law of

2000. Cane millers and beet processors must pay farmers at least the guaranteed minimum price. For sugar

year 2001 (October 2001-September 2002), the minimum price was 17,040 yen/ton ($131) for sugarbeets

and 20,370 yen/ton ($157) for sugarcane. 

Sugar processors receive a “domestic sugar rationalization target price” for raw sugar, according to the

Sugar Price Stabilization Law as amended in June

2000. It is set each year by MAFF, and is defined as

“the cost of sugar that domestic refiners are able to

receive if they rationalized (through restructuring,

etc.).” In principle, MAFF is trying to encourage 

refiners to make their operations more efficient, and

does not attempt to cover the costs of refiners that

have been unable or unwilling to reduce costs. In 

sugar year 2001, the target price is set at 151,800

yen/ton ($1,168). 

MAFF provides a subsidy to sugar refiners to compensate them for the difference between the market price

of domestic sugar and the “target price.” The

Agriculture and Livestock Industries Corporation

(ALIC), a government-owned firm, provides the subsidy (A), based on funds collected in a surcharge on

imports (see fig. 2). An additional subsidy is given to

domestic processors out of Japan’s national budget

(B). The total amount of subsidy (A plus B) varies by

growing region (see table 1). According to MAFF, currently subsidy (A) is worth approximately 77 billion

yen and subsidy (B), 13 billion yen, for a national total

of 90 billion yen ($692 million). The subsidies to the

processors allow them to buy sugarcane and sugarbeets at the high mandated prices that farmers receive.

Corn sweetener policies. Starch-containing products,

like grains and potatoes, can be processed to extract

the starch, and the starch can be refined into sweeteners. The corn sweetener industry arose in Japan

because of the high sugar prices that were a result of

government policies. Using imported corn, refiners

could produce starch and then extract high fructose

and other sweeteners that could replace sugar in many

uses—particularly in soft drink production. To prevent

HFCS from hurting demand for domestic sugar and to

obtain funds with which to help pay for the sugar subsidies, the government began intervening in the HFCS

market in 1982. Since then, ALIC has been buying all

HFCS from processors and reselling it to them after

adding a surcharge (unless HFCS prices are at unusually high levels). 

The surcharge is calculated by formula as a fraction

of the difference between an average supply price

for HFCS and a higher target price for HFCS. The

Economic Research Service, USDA 3

Domestic Policies

Table 1—Total subsidy to sugar refiners, October 2001-September 2002, in three producing regions

Kagoshima Okinawa Hokkaido

yen $US yen $US yen $US

per ton

204,797 1,652 206,247 1,664 84,480 681

Source: FAS/Tokyo.

Figure 2

Prices and subsidies in Japan's sugar 

refining sector

Source: FAS/Tokyo.

Adjustment fund

Subsidy A

Imported sugar Domestic

 sugar

0

Average import price

Resale price

Subsidy B

Total subsidy

Rationalization target 

price

Quantity

Yen/kg
surcharge was 2,163 yen/ton ($17) for the first quarter (October-December 2001) of sugar year 2001.

MAFF calculates quarterly target volumes for HFCS

production for each manufacturer. If the target is

exceeded, the manufacturer pays a secondary surcharge of 1,218 yen/ton, or $9 (for sugar year 2001),

making the total surcharge 3,381 yen (2,163 +

1,218) if targets are exceeded. 

This acts as a kind of production quota for HFCS,

giving MAFF power to determine what production

will be. Proceeds from the surcharges go to ALIC’s

Sugar Production Promotion Fund and are used to

lower the surcharge placed on imported raw sugar

that is used by sugar refiners. Thus, the surcharges

are an effort to reduce the competitiveness of HFCS

versus sugar, and to prevent the balance between

sugar and HFCS from changing.

4 Economic Research Service, USDA
Sugar. ALIC purchases all raw sugar imports from

importing companies at the average import price

(revised quarterly) and sells the sugar back to them at

a predetermined resale price (also revised quarterly)3.

The sugar does not actually change hands during the

transaction. In July-September 2001, the average

import price was 32,580 yen/ton ($251) and ALIC’s

resale price was 59,960 yen/ton ($461). The difference, or surcharge, is 27,380 yen/ton ($211), and

accrues to ALIC. ALIC’s profit on this transaction is

calculated by MAFF so that the total amount collected

(in addition to surcharges from HFCS producers)

would be sufficient to fully compensate the domestic

processors for the difference between the market price

of domestic sugar and the “target price.” This difference is called the “Adjustment Fund” and goes into

ALIC’s Sugar Production Promotion Fund (see fig. 2).

If world prices are at extremely high levels, companies

do not have to sell to and buy back from ALIC. This

has not occurred in the last 20 years.

Each quarter, MAFF determines an import volume target for raw sugar for each importer based on ALIC’s

resale volume to that importer in an ordinary year. If

the target is exceeded, MAFF assesses a secondary

surcharge. Currently the volume target (for all firms

together) is approximately 1,470,000 metric tons annually and the secondary surcharge is 23,309 yen/ton

($179). This authority stems from an amendment to

the Sugar Price Stabilization Law in 1982.

Although the raw sugar tariff was reduced to zero in

April 2000, refined sugar imports face a tariff of 21.5

yen/kg with an additional surcharge of 53.88 yen/kg,

equivalent to $414/ton (this surcharge is effective for

the 2001 sugar year). This effectively bars refined

sugar imports, which are virtually zero (see table 2).

Corn imports for sweetener use. Corn can be

processed into corn starch and then refined to make

HFCS. Under the pooled quota system, MAFF allocates a semi-annual import quota specifically for corn

to be used to produce starch. For example, in the first

half of Japanese fiscal year 2001 (April-September

2001) the amount was 1,287,500 tons. The amount of

the quota is calculated by dividing the planned production quantity of corn starch by .66 (to get the amount

of unmilled corn needed for starch production). Thus,

in addition to its control over HFCS production volume through surcharges, MAFF also has a mechanism

to control imports of the main input to HFCS. 

Planned corn starch production must be matched by

purchases of domestic potato and sweet potato starch in

the ratio of one part of potato starch for 12 parts of corn

Economic Research Service, USDA 5

Border Policies

3 Japan notifies its sweetener policies to the World Trade

Organization (WTO) as part of its Aggregate Measurement of

Support (AMS) total, i.e., as part of the amber box. However,

Japan does not report the ALIC as a state trading organization for

sugar, and does not report government control over the volume of

sugar and corn imports to the WTO. 

Table 2—Tariffs, tariff-rate quotas, and trade in Japan's sweetener sector, 2002

Commodity Tariff Tariff-rate quota Imports

Ad valorem Specific Comment Tariff Quota size in 2001

In-quota Over-quota

ad valorem specific

Percent Yen/kg Percent Yen/kg 1,000 tons 1,000 tons

Raw sugar, centrifugal 0 1,531

Refined sugar 21.5 0

High-fructose corn syrup 50 25 Greater of the ad 0

valorem or specific 

tariffs

Corn for starch 

manufacture 0 (see text) 3,521

Starch, except wheat 25 119 157 175

Wheat starch 25 34.4 Wheat quota 0.001

Notes: In 2001, the average value of the yen was 120.96 yen/US$.

One kilogram equals 2.204 pounds.

Source: Japan Tariff Association. Customs Tariff Schedules of Japan, 2002.
starch.4 Corn sweetener producers can import (at the

zero tariff rate) up to 12 times the volume of potato

starch that they use. Any corn imports beyond that volume face a tariff of 12,000 yen per ton or 50 percent of

the value of a shipment, whichever is higher. 

During the Uruguay Round (UR), Japan committed

itself to allowing at least 3.75 million tons of corn

imports for industrial (including sweetener) use each

year, with a zero tariff. The maximum ratio of potato

to corn starch in domestic sweetener production was

set at 1:11. Since 1994, the ratio of potato to corn

starch has dropped as low as 1:13. For the second half

of Japanese fiscal year 2001 (October 2001-March

2002) the ratio was set at 1:12.

In addition to the quota on corn as a source of substitute sweeteners, Japan blocks the import of HFCS with

a high tariff and limits starch imports through a tariffrate quota of 157,000 tons per year. Japan’s former

absolute quota on starch imports was successfully

challenged in a dispute before the General Agreement

on Tariffs and Trade in 1987. Japan declined to liberalize starch imports, choosing instead to compensate its

trade partners in other ways (see Elleson), in order to

protect its domestic sugar industry from imports of a

potential feedstock for high fructose sweeteners. Later,

in the UR, Japan agreed to allow over-quota starch

imports, but only at a much higher tariff (see table 2).

To prevent Japan’s food manufacturers from circumventing the high barriers to trade in pure sweeteners

(sugar and HFCS) or sweetener feedstocks (corn and

starch), Japan has also placed higher tariffs on intermediate or final products that contain sugar. For example: citrus juices containing added sugar are assessed a

tariff of 29.8 percent or 23 yen/kg (whichever is

greater), while juices without added sugar face a tariff

of 25.5 percent; cake mixes with added sugar have a

tariff of 23.8 percent versus 12 percent for mixes with

no sugar added; etc.

6 Economic Research Service, USDA

4 This requirement for domestic purchase was part of Japan’s UR

commitment in 1995.
Prices. The most important price determining wholesale refined sugar prices in Japan is the resale price of

imported raw sugar (59,960 yen/ton), since two-thirds

of raw sugar is imported and subsequent pricing by

sugar refiners depends on this base price. Equivalent to

$461/ton (at an exchange rate of 130 yen/US$), the

resale price is about 22 cents per pound. This is well

above the world price for raw sugar in 2000, about 8.5

cents/lb. The retail price for refined sugar in Tokyo in

2000 averaged 211 yen/kg, or 89 cents/lb. This is

twice as high as the U.S. retail price for refined sugar

in 2000, 42 cents/lb (see fig. 3).

The guaranteed price for sugarcane (in sugar year 2001)

is equivalent to about $0.61/lb. for raw sugar. This is

over 6 times higher than the calendar-year 2001 import

unit value (a good indicator of the world price) for raw

sugar. For sugar beets, the guaranteed minimum price of

16,930 yen/ton is equivalent to $0.33/lb. for raw

sugar—over 3 times the average import price.

Gains and losses. Japan’s farmers who raise sugarcane and sugarbeets receive much higher prices as a

result of Japan’s policies. The Organization of

Economic Cooperation and Development (OECD)

estimated that this price support amounted to 67 percent of the total value of Japan’s production of sugar

from domestic cane and beets in 1999. 

Japan’s corn sweetener industry arose in the 1970s, taking advantage of the high sugar prices. Using imported

corn, the industry refined HFCS at a cost below the price

of sugar in Japan. Over time, Japan’s Government

imposed several burdensome requirements on the corn

refiners. One was a requirement to use domestic starch

from potatoes and sweet potatoes for a fraction of 

HFCS production. The government sets a standard price

for those potatoes used for starch production. In 2001,

the price was 25,233 yen/ton ($209/ton) for sweet potatoes and 13,960 yen/ton ($115) for white potatoes. In

1999, the last year with available data, one-fifth (206,000

tons) of total sweet potato production and 37 percent

(1,088,000 tons) of white potato production was used for

starch. HFCS refiners would prefer to buy corn, which

has a higher starch yield, if they could do so at world

prices. However, the corn tariff is at least 50 percent

unless imports are accompanied by purchases of domestic potato starch. Another burden was imposed on HFCS

manufacturers in 1982—the surcharge on syrup production for HFCS (see page 3). Despite the obstacles caused

by government policies, the corn sweetener industry has

grown by taking market share away from sugar, and now

has over 40 percent of the sweetener market.

Consumers pay. Japan’s consumers face higher

prices as a result of the sweetener policies. The OECD

estimated that Japan’s control of refined sugar prices

added 176 billion yen ($1.54 billion) to consumer food

costs during 1999. The reason for these higher costs is

that the sweetener policies raise Japanese sugar prices

far above world sugar prices. If Japan’s retail sugar

prices fell to U.S. levels—a reasonable scenario for

this relatively undifferentiated product—they would be

50 percent lower than the current level (see fig. 4).

Because of high sweetener prices, consumers have less

to spend on other items, and consumption of sweeteners is lower in Japan than it would be otherwise.

ALIC’s mandate to purchase all raw sugar at the border and all domestically manufactured HFCS means

that the government has considerable control of the

market (unless world sugar prices or domestic HFCS

prices are at extremely high levels (see page 3). The

price at which ALIC resells sweeteners to the processors becomes a floor that helps determine the user

price of refined sugar and HFCS, and the surcharge

from this transaction is, at least partially, passed on to

consumers by the processors. 

Economic Research Service, USDA 7

Policy Implications

1991 93 95 97 99

195

200

205

210

215

220

225

230

235

240

245

0

20

40

60

80

100

120

Figure 3

Sugar retail prices, Japan and the

United States

Yen/kg

Sources: Monthly Statistics of Agriculture, Fishery and Forestry, 

Japan, various issues; and ERS, USDA.

Cents/lb

Yen, per kg, Japan Cents/lb, Japan Cents/lb, U.S
One consequence of the high price of sugar in Japan has

been to raise the cost of manufacturing food products

that contain sugar. Food manufacturers and food

importers have increasingly turned to foreign sources of

prepared foods or food preparations to avoid Japan’s

high sweetener costs, and sweetener consumption for

processed food has been falling in Japan. Sweetener

supply (which is roughly equal to use, either by households or by food and beverage manufacturers) in Japan

peaked in 1989, at 4.4 million tons, and has fallen off

by about 500,000 tons since. The decline on a per-person basis is evident in figure 5. Rather than marking just

a reduced level of sweeteners in foods and beverages,

the decline may partly reflect imported products that

already contain sugar being substituted for products to

which sugar is added in Japan.

MAFF adjusts the surcharge on raw sugar at the border primarily to compensate for processor costs of

buying sugarcane and sugarbeets in Japan. Its surcharge varies according to world prices but also

according to internal policy goals. The surcharge can

prevent Japan’s consumption and production of sweeteners from changing according to world price signals.

Thus, Japan’s contribution to absorbing more sweeteners when world prices are low, or less of these products when world prices are high, may be reduced. The

rest of the world is forced to balance supply and

demand without a contribution from Japan.

Furthermore, by preserving its own high-cost production, Japan imports less than it would without the

sweetener policies. Its farmers produce more, and its

consumers use less sugar than if prices in Japan were

lower. This reduces world demand for sweeteners and

thus the world price for sweeteners. 

Possible effects of liberalization. A 1999 study by the

Australian Bureau of Agricultural and Resource

Economics (ABARE) estimated that world prices would

rise by 5 percent and the volume of sugar trade would

grow by 500,000 tons if Japan were to cut its tariffs,

surcharges, and levies on sugar imports to zero over a 5-

year period. The study assumed that HFCS production

would be unaffected and that most Japanese domestic

sugar production would remain because of other means

of support by the government. Production declined by

200,000 tons (22 percent) and consumption increased

by 300,000 tons (13 percent) in the ABARE simulation.

Recent modeling at the Economic Research Service

(ERS) using a multi-commodity partial equilibrium

framework5 has simulated what might happen if Japan

were to eliminate all its border protection as well as all

its domestic support that is trade-distorting. The results

for sugar are striking. After a few years of adjustment,

sugar production falls by over 40 percent. Consumer

and producer prices in Japan fall by over 70 percent.

Imports rise by from 560,000 to 735,000 tons over

current levels, and world sugar prices rise by 1.1-1.4

percent, depending on what assumption is made about

HFCS markets. Trade liberalization would provide

8 Economic Research Service, USDA

0

50

100

150

200

250

Figure 4

Comparing sugar prices, 2000

yen/kg

Sources: Monthly Statistics of Agriculture, Fishery and Forestry, 

various issues; and ERS, USDA.

U.S. retail

 price

Tokyo retail price

Japan beet 

producer price

Import unit value

Resale price

Prices, refined sugar basis 1961 65 69 73 77 81 85 89 93 97

0

10

20

30

40

50

Figure 5

Sweetener consumption in Japan

Kg/person/year

Sweeteners

Source: FAOSTAT.

Sugar

5 Documentation of the model can be found at

http://coldfusion.aers.psu.edu/wto/ .
substantial benefits to Japan’s consumers and to sugar

producers in exporting countries.

A key uncertainty is the reaction of Japan’s HFCS production to falling sugar prices. While sugar and HFCS

can substitute for each other in most uses, there is a

preference for HFCS in soft drink production—a

major use. A range of model scenarios used different

assumptions about the linkage between HFCS production and sugar prices. If HFCS production is unaffected—there is no substitution of imported sugar for

Japan’s HFCS—then sugar imports rise by 560,000

tons, and the world sugar price would rise by 1.1 percent. If HFCS output in Japan is sensitive to the sugar

price decline, and were assumed to drop by as much as

300,000 tons in corn equivalent, then Japan’s sugar

imports would rise 735,000 tons over current levels,

and world sugar prices by 1.4 percent. 

Economic Research Service, USDA 9
Australian Bureau of Agricultural and Resource

Economics. 1999. Sugar: International Policies

Affecting Market Expansion. Research report 99.14.

__________. 2001. Agricultural Trade Policies in

Japan: The Need for Reform. Research report 01.5.

__________. 1988. Japanese Agricultural Policies: 

A Time for Change. Policy monograph no. 3.

Economic Research Service, USDA. http://www.

ers.usda.gov/briefing/sugar/Data/data.htm, tables 3

and 4. World and U.S. prices.

Elleson, Ruth. 1995. The Japanese Market for U.S.

High-Value Products: Effects of the GATT-11

Agreement. ERS/USDA Staff paper 9511.

ERS/Penn State Trade Modeling Project. 

http://coldfusion.aers.psu.edu/wto/

Food and Agriculture Organization of the United

Nations. FAOSTAT. http://apps.fao.org. Food

Balance Sheet.

__________. Technical Conversion Factors for

Agricultural Commodities. http://www.fao.org/

WAICENT/FAOINFO/ECONOMIC/ESS/pdf/tcf.pdf

Foreign Agricultural Service, USDA. Sugar reports in

the GAIN series and report JA9163. See http://www.

fas.usda.gov/scriptsw/attacherep/default.asp

Japan Tariff Association. 2002. Customs Tariff

Schedules of Japan.

Ministry of Agriculture, Forestry and Fisheries.

Monthly Statistics of Agriculture, Forestry and

Fisheries.

__________. Statistical Yearbook of Agriculture,

Forestry and Fisheries.

Organization for Economic Development and

Cooperation. Tables supporting the 2001

Monitoring Report. 

U.S. Department of Agriculture. Production, Supply,

and Distribution database (PS&D). 

http://www.ers.usda.gov/Data/PSD/

10 Economic Research Service, USDA

References