What effects will the agreement have on the Japanese market? The EPA between the two countries will be a touchstone for the Trans-Pacific Partnership (TPP) negotiations, which have entered a crucial stage.
On January 15, when the EPA took effect, supermarket chain Akidai — which operates four shops in the Tokyo metropolitan area — launched a sale on “Aussie beef.” At its outlet in Nerima Ward, shoppers were seeking sale items after the shop opened at 10 am. One product featured was thin-sliced roast beef (170 grams) for 350 yen (uS$3), 10 per cent lower than the usual price.
A local 45-year-old homemaker beamed, “I don’t know anything about the EPA, but it helps me out that it’s cheaper.”
Akidai had actually bought the beef before the tariff reduction, but as Akidai President Hiromichi Akiba explained: “The primary reason [for the sale] is that after a series of grocery price hikes, we’re finally getting an extended price cut. We want to pass on purchase price cuts in shop prices.”
Major retailer Aeon Co. cut prices on Australian beef up to about 10 per cent at about 1,200 chain supermarkets, and slashed prices of Australian wines up to 17 per cent at most of its stores. Aeon manages its own livestock ranches in Tasmania, Australia. The spokesperson said, “We want to take the EPA as an business opportunity for customers who are not familiar with Australian products.” The company hopes that the agreement will lead to increased consumption of Australian goods.
Until recently, Japan had imposed a 38.5 per cent tariff on Australian beef, but since January 15, tariffs on the frozen meat often displayed in refrigerated cases at supermarkets fell to 32.5 per cent.
According to livestock industry sources, assuming that exchange rates and distribution costs hold unchanged, the purchase prices paid by retailers are estimated to decrease by 4 to 5 per cent. However, a distribution industry source said, “As many companies were not able to reflect purchase price increases in their retail prices, the effects of the price cuts will be limited.”
Beef prices are on the rise around the world, primarily due to increased demand from emerging nations such as China and a shortage of fodder in the United States caused by drought.
For Japan, the weaker yen exacerbates the situation. With the depreciation of the yen, purchasing products from abroad becomes more expensive and import prices climb. According to the Agriculture and Livestock Industries Corporation, an independent administrative agency based in Tokyo, the average retail price of Australian peaches per 100 grams had risen from 178 yen in fiscal 2013 to 217 yen as of November last year.
Therefore, even with the EPA in effect, many companies are reluctant to cut prices. At the Sukiya beef-bowl chain, a spokesperson said, “The unusual sudden price jumps in the beef market and the weaker yen have a huge impact, so the benefits [of the EPA] are yet unknown.”
Anticipation and anxiety
If cheaper beef is brought into Japan after the Japan-Australia EPA takes effect, it will become a threat to livestock farmers within the nation. In fiscal 2015, the Japanese government allocated a draft budget of 209.7 billion yen to bolster the nation’s livestock and dairy industries. The funds are aimed at assisting with rebuilding cattle barns, leasing milking machines and other support measures.
Japan’s livestock industry is looking to the export of high-grade wagyu beef as a means for survival. From January to November last year, Japan’s beef exports totaled a record 7.1 billion yen. The government hopes to increase exports to 25 billion yen by 2020.
In other sectors, the EPA also presents an excellent opportunity for the automobile industry. According to the economy, trade and industry ministry, the abolition of tariffs on passenger vehicles would reduce a 43.6 billion yen burden on domestic automobile manufacturers.
In anticipation of the EPA taking effect, Toyota Motor Corp. launched the sale of new models at the beginning of this year and is making an effort to expand its activities in the Australian market.
(US$1 = 117.67 yen)
Publication Date : 25-01-2015