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Japan-EU EPA sparks hope, fear among Japanese farm producers, retailers

TOKYO -- With the introduction of the Economic Partnership Agreement (EPA) between Japan and the European Union (EU) on Feb. 1, Japanese consumers are likely to benefit from lower prices on European wines and cheeses, while producers of such products are worried about competition.

Tariffs of up to 94 yen per bottle of wine were abolished with the EPA. "European wines will be seen as more affordable and that will enliven the market," said President Teruyuki Daino of major wine distributor Mercian Corp.

Major liquor makers and shops are launching sales drives. Suntory Holdings Ltd. lowered wine prices by 20 yen to 140 yen on Feb. 1, while Asahi Breweries Ltd. and Sapporo Breweries Ltd. will introduce price cuts for wines shipped on March 1 and later.

In contrast, tariffs on cheese will be lowered gradually, limiting the immediate impact on prices. A specialty cheese retailer in Tokyo says they want to cut prices "as much as possible," while an official of major cheese maker Meiji Co. expressed expectation that demand will grow as many types of cheese are imported.

Major retailers are offering discounts for European products. Aeon Co., which had already lowered wine prices before the EPA took effect, cut the prices of 330 wine brands by around 10 percent on average on Feb. 1, and is offering discounts on cheese and pasta until Feb. 3. Supermarket chain Seijo Ishii Co. is also launching a sales promotion event involving up to 220 items, including price cuts for wines of between 100 yen and 300 yen beginning Feb. 1. The Matsuya Ginza department store is offering 15-20 percent discounts on 100 bottles of French wine in about 15 types.

Tariffs on European products such as sweets, butter and pork will be lowered in phases. Tariffs of around 8-12 percent on apparel such as overcoats, jackets and sweaters have also been abolished immediately, but how top brands will respond to the move is yet to be seen. An official at the Japan office of a famous Italian brand said no pricing policy related to the EPA has been confirmed.

--- Japanese producers worry about European competitors

In central Japan's Yamanashi Prefecture, the country's largest wine producer, manufacturers are worried about the tariff cuts introduced with the EPA. "The EU is the home to wines, and we will face tougher competition as imports increase," said Toru Mochizuki, an adviser to the Yamanashi Prefecture Wine Manufacturers' Association.

For years, France was the largest wine exporter to Japan, but Chile took over the position in 2015 following the introduction of the Japan-Chile EPA in 2007. European wines still make up more than half of the wine imports, and the immediate tariff cuts will have a major impact.

The agreement also reduced European tariffs on Japanese wines. Toshihisa Sugita, an official at the Kofu Chamber of Commerce & Industry, expressed the hope that European consumers will take to Yamanashi wines. "The quality and taste of our wines have won high marks internationally. We want ordinary consumers in the EU to know our wine is good," he said.

Meanwhile, dairy farmers are increasingly worried about the expected growth in European cheese imports. The government of the northernmost prefecture of Hokkaido, the largest cheese producing region in Japan, estimates that production value will go down by 7.4 billion yen to 8.5 billion yen in 2033 when cheese tariffs will be completely abolished, while the production volume will remain the same as now.

European cheese items are priced at around half of domestic counterparts, and "Hokkaido producers will face fierce competition," says an official at the dairy and animal husbandry section of the JA Hokkaido Chuokai agricultural cooperative.

The central government intends to support producers with the automation of milking and other measures, while the Hokkaido government will try to increase domestic demand. But JA Taiki agricultural cooperative chief Masaki Sakai in the town of Taiki, Hokkaido, is worried. "The estimates of the central and prefectural governments are not precise. If domestic cheese demand or milk prices go down, it's going to be a big threat," he said.

Some producers nevertheless hope for an increase in exports. As the EPA includes a provision for the protection of geographic indication -- emphasizing quality by using the name of a product's region of origin in branding when that area has a good reputation -- brands such as "Kobe Beef" or "Yubari Melon" can be used to promote exports to the EU. In fiscal 2017, one-third of Japan's about 38 metric tons of Kobe beef exports went to the European market.

The Kobe Beef Marketing & Distribution Promotion Association, which has commercial farmers as members, has promoted its products in Europe in a bid to improve perception and brand image among European consumers. "We would like to make more European people understand what real 'Kobe Beef' is," said an association official about the body's effort to leverage the EPA to promote its product.

(Japanese original by Shiho Fujibuchi, Business News Department; Kenji Noro, Kofu Bureau; Chie Yamashita, Hokkaido News Center; and Hajime Meno, Kobe Bureau)

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