Boston, MA -- (SBWIRE) -- 12/10/2012 -- The unfavourable economic outlook in Japan, with a real danger of entering recession in 2013 as external demand deteriorates, will make its effects felt across the agribusiness sector. Consumption of pork and beef will grow slowly as household expenditure stagnates, suppressing demand for corn and soybean feed, which will also see declines in response to high prices in global markets. The vast majority of agricultural production in Japan is directed towards domestic consumption as farms are typically small and costs are prohibitively high relative to major exporting countries, so farmers are very dependent on consumers' brittle confidence and their willingness to pay more for Japanese produce. The Agriculture, Forestry and Fisheries Ministry reported in August that self-sufficiency on the basis of intake of calories has fallen to a 17-year low at 39%, highlighting fundamental weaknesses in the sector which may be further exposed if Japan returns to the Trans-Pacific Partnership table.

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Key Forecasts

- Corn consumption to 2016: down 0.6% to 15.6mn tonnes. Weak demand across livestock sectors, the main driver of consumption, as well as high prices in the short term (with Japan heavily dependent on imports), will lead to a marginal slackening of demand for corn.
- Poultry production growth to 2016: 11.2% to 1.42mn tonnes. Production will grow steadily as consumers on tight budgets prefer cheaper poultry meat to beef and pork.
- Wheat consumption growth to 2015/16: 2.3% to 6.5mn tonnes. Minimal growth reflects our expectation for low economic growth over our forecast period and the impact of high prices in the short term.
- 2012 real GDP growth: +1.4% (up from -0.7% in 2011, forecast to average just under 1% out to 2016).
- 2012 consumer price inflation: 0.1% average (up from -0.2% average in 2011, forecast to average 0.7% to 2016).

Industry Outlook

After appearing to be favourably disposed to membership of the Trans-Pacific Partnership (TPP), a multilateral free trade agreement that aims to integrate the economies of the Asia Pacific region, Japanese Prime Minister Yoshihiko Noda pulled out of involvement in the latest round of talks taking place in September in Virginia, US, in the face of intense domestic political pressure. The powerful farming sector led by the cooperative organisation Japan Agriculture and many of Noda's Democratic Party of Japan allies firmly oppose the agreement believing that it would devastate the agricultural sector.

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