RESTRICTED
WORLD TRADE IDA/INV/1/Add.3
8November 1995
ORGANIZATION(95-3448)
International Dairy Agreement
INTERNATIONAL DAIRY COUNCIL
Reply toQuestionnaire 5Regarding Information on
Domestic Policies andTrade Measures
JAPAN
A. Production
1. Support and/or stabilization measures
(a) Inventory oftheinstruments ofsupport and/or stabilization
(1) Milk fordrinking
Nomeasures aretaken bytheGovernment ofJapan (GOJ) tosupport theprice ofmilkfor
drinking. Theprice issetthrough themarket mechanism among thetransacting parties concerned.
(2) Milk forprocessing
(i) Deficiency payment system
Under the"Manufacturing Milk Producer Compensation Temporary law"theGOJ
makes so-called deficiency payments toproducers ofmilkforproduction ofbutter,
skimmed milkpowder andother major dairy products. Thedeficiency payment covers
thedifference between theguaranteed price (support price forproducers) andthe
standard transaction price (manufacturer 'spurchase price ofmilkforprocessing).
Thepriceofmilkforcheese issetthrough themarket mechanism among thetransacting
parties concerned since FY1987.
(ii) Price stabilization system ofdesignated dairy products
Inorder tostabilize theprices ofthedesignated dairy products atthelevel ofthe
stabilizationindicativeprice,theLivestockIndustryPromotionCorporation(hereinafter
referred toasthe"LIPC") maypurchase adesignated dairy product where theprice
oftheproduct fallsoritslikely tofallbelow thestabilization indicative price.
Designated dairy producers under thissystem arebutter, skimmed milk powder,
sweetened condensed whole milkandsweetened condensed skimmed milk. TheLIPC
sellstheproduct initspossession when theprice hasrisen orislikely toriseabove
thestabilization indicative price. TheLIPC willimport these products fromoverseas
andintroduce them intothedomestic market when there isnostock possessed bythe
LIPC.IDA/INV/1/Add.3
Page2
(iii) Import system
TheGOJtariffied alldairy products on1April 1995 which hadbeen subject to
quantitative import restrictions.
(b) Levels ofsupport prices
TheGOJsetstheadministered prices ofrawmilkforprocessing anddesignated dairy products
prior tothebeginning ofeachfiscal year(April-March). Theadministered prices werethesame as
those oftheprevious year.
(1) Guaranteed price andstandard transaction price ofmilkforprocessing
Guaranteed price isthesupport price forproducers ofmilkforprocessing. Theprice isset
atthelevelnecessary toensure thecontinuing production ofmilkinareaswhere asubstantial proportion
ofthemilkproduced isforprocessing. Thesupply anddemand formilkandother economic conditions
arealsoconsidered insetting theguaranteed price.
Standard transaction price isthemanufacturer 'spurchase price ofmilkforprocessing. The
priceisbased onthemanufacturer 'ssalesprices ofthedesignated dairy products intheprevious year.
Fiscal year Guaranteed price Standard
transaction priceDeficiency
paymentCeiling quantity
fordeficiency
payment
(A)
[¥/kg.](B)
[¥/kg.](A-B)
[¥/kg.] [1,000 tons]
1990 77.75 65.98 11.77 2,350
1991 76.75 65.40 11.35 2,400
1992 76.75 65.40 11.35 2,400
1993 76.75 65.26 11.49 2,350
1994 75.75 64.26 11.49 2,300
1995 75.75 64.26 11.49 2,300
(2) Stabilization indicative prices ofthedesignated dairy products
Toachieve stable consumption ofdairyproducts, stabilization indicative prices aresetbytaking
account ofthemarket prices oftheprevious year.IDA/INV/1/Add.3
Page3
Fiscal year Butter Skimmed milk
powderSweetened
condensed whole
milkSweetened
condensed
skimmed milk
[¥/kg.] [¥/25 kg.] [¥/24.5 kg.] [¥/25.5 kg.]
1990 1,065 12,833 8,178 7,305
1991 1,051 12,663 8,055 7,193
1992 1,051 12,663 8,055 7,193
1993 1,032 12,841 8,055 7,193
1994 993 12,841 8,055 7,193
1995 993 12,841 8,055 7,193
(c) Amount ofproducer subsidies
Total subsidies formilkforprocessing through thedeficiency payment.
Fiscal year Subsidies
[¥million]
1990 26,646
1991 26,801
1992 27,240
1993 27,002
1994 26,427
(d) Average returns toproducers including methods ofdetermining those returns andconstituent
elements thereof
Asexplained inA.1(a) above, prices ofmilkfordrinking andforcheese arelefttothemarket
mechanism among thetransacting parities concerned while theprice levelofmilkforprocessing is
setbytheGOJ.
Returns toproducers aredetermined bythemilkprices andmarketed quantity fordrinking,
cheese andprocessing including thedeficiency payment, aswellasbythecostofdelivery andother
expenses.IDA/INV/1/Add.3
Page4
Fiscal year Price
[¥/kg.]
1990 88.4
1991 88.8
1992 89.0
1993 87.9
Note: Consumption tax(3percent) hasbeenadded since FY1989.
2. Policies andmeasures oftheGOJorother bodies likely toinfluence production, other than
those listed under 1.
(a) Supply control measures
Since rawmilkproduction inJapan hasbeenonapotential trend ofover-supply thetwosupply
control systems haverestricted theproduction levelnottoexceed thedemand formilk.
(i) Supply control ofmilkforprocessing bysetting theceiling quantity forthedeficiency
payment
TheGOJsetsaceiling quantity ofmilkforprocessing eligible forthedeficiency
payment. Thedeficiency payment isnotpaidforthemilkwhich exceeds thisceiling
quantity. Thequantity isannually setconsidering thelatest situation ofsupply and
demand ofdairy products.
(ii) Supply control ofmilkbytheproducers 'association
Inorder toreinforce theabove supply control system, thenationwide milkproducers '
association (theJapan Dairy Council) hasbeenadministering thesupply control ofmilk
atfarmyard since FY1979 ontheadvice andguidance oftheGOJ. TheJapan Dairy
Council setsthetotalamount ofplanned output ofrawmilkandallocates ittothe
prefectural producers 'associations. Ifaregional association produces more milkthan
planned, theJapan Dairy Council imposes apenalty anddecreases theceiling quantity
oftheassociation forthenextfiscal year.
TheGOJsupports thissupply control system through allocating theceiling quantity
ofprocessing milkforprefecture.IDA/INV/1/Add.3
Page5
B. Internal prices andconsumption
1. Representative retail andwholesale prices onmajor domestic markets
(1) Retail prices ofdrinking milkanddairy products
Calendar year Drinking milk
(Tokyo)
[¥/1]Butter
(Tokyo)
[¥/225 gr.]Cheese
(Tokyo)
[¥/225 gr.]Infant formula
(Tokyo)
[¥/980 gr.]
1990 202 375 345 2,186
1991 205 375 357 2,269
1992 208 375 358 2,260
1993 211 374 374 2,446
1994 209 373 358 2,442
(2) Wholesale prices ofdairy products (selling prices forlarge-scale users)
Calendar
yearSweetened
condensed
whole milk
[¥/24.5 kg.
bigcan]Sweetened
condensed
skimmed milk
[¥/25.5 kg.
bigcan]Whole milk
powder
[¥/25 kg.
sack]Skimmed
milkpowder
[¥/25 kg.
sack]Butter
(unsalted)
[¥/kg.]
1990 8,511 7,725 19,581 13,601 1,137
1991 8,952 8,137 19,963 13,699 1,176
1992 8,905 8,095 19,872 13,687 1,153
1993 8,455 7,633 19,257 13,290 1,050
1994 8,320 7,542 19,128 13,277 962
2. Factors which influence thelevelofinternal consumption
Itisexpected thatthetrend ofslowincrease intheoverall demand formilkanddairy products
willcontinue.
Thefollowing factors generally determine thefuture growth ofdemand formilkanddairy
products:
(1) Health consciousness
Milk fatusedtohaveahigher value thannon-fat solids. However, thisislikely tochange
because ofconsumers 'health concerns. Consumers prefer tohavemore low-fat milkproducts and
decrease theintake offattyproducts. Theincrease ofcheese andyogurt consumption isconsidered
tobeanother signofconsumers 'health concerns.IDA/INV/1/Add.3
Page6
(2) Quality concerns
There isagrowing demand forhighquality andsafeproducts. Thegrowth rateofnatural
cheese consumption hasbeen higher thanthatofprocessed cheeses, which usedtobeconsumed
dominantly inJapan.
Manyconsumerorganizationshaveconcludedspecialcontractswithdairyproductsmanufacturers
inorder topurchase safeproducts andpaypremium.
(3) Convenience
Margarineconsumerssaythat"easytospread"isanimportantfactorintheirchoiceofmargarine
inaddition tohealth consciousness. Thegrowing popularity ofindividually packaged products may
alsoreveal consumers 'preference forconvenience.
(4) Price
Price isstillconsidered tobethebiggest factor insome consumers 'preference ofmargarine
overbutter. Thisbecame apparent when thesalesofbutter increased withtheprice dropcaused by
therecent over-supply ofbutter.
(5) Income
Theincrease ofincome leads toanincrease intheconsumption ofmilkanddairy products.
(6) Weather conditions particularly insummer
Insummer, thetemperature hasabiginfluence onthedemand fordrinking milkandsoftdrinks
containing skimmed milkpowder. Actually, thecoolsummer in1993 resulted inadropinsalesof
drinking milkfromtheprevious summer. Ontheother hand, thehotsummer in1994resulted inlarge
increase ofdemand fordrinking milkandskimmed milkpowder compared totheprevious coolsummer.
3. Policies andmeasures andcomments ontheireffects onconsumption
Since stable expansion ofdemand isessential inensuring sound policies andmeasures have
beentaken bytheGOJ.
(1) Measures forstabilizing thesupply ofrawmilkandforstabilizing thepriceandsupply ofmajor
dairy products. (Fordetails refertoA.1(a), A.2andB.1).
(2) Measures toexpand andstabilize thedemand fordrinking milk
(i) Subsidy tomilkforschool lunch
InJapan, milkisusedforschool lunch inelementary andjunior highschools. The
GOJextends subsidies through theLIPC forthemilkusedforthatpurpose. (Thefiscal
1994 budget provided forthesubsidy of¥5,453 million foratotalquantity of
475,000 kl.)IDA/INV/1/Add.3
Page7
(ii) Subsidy tomilkconsumed atday-care centres, kindergarten, elderly homes, etc.
Supply ofmilkforkindergarten children andtheelderly people isalsosubsidized by
theGOJ.
(iii) Subsidy tostudy thetrend ofconsumption
(iv) Subsidy todisseminate knowledge about nutrition ofdairy products
C. Measures atthefrontier
1.and2. Customs tariffandimport measures attarifflinelevel, suchasduties, variable levies,
other special charges, quantitative restrictions, minimum prices, State trading, etc.
Specificmilkproductssuchasbutter,skimmedmilkpowderetc.usedtobesubjecttoquantitative
import restrictions.
TheGOJ introduced thefollowing measures inaccordance withWTO Agreement from
1April 1995.
(1) Quantitative import restrictions wereconverted totariffequivalents shallbereduced byatleast
15percentinsixyears from FY1995 toFY2000.
(2) Thecurrent access opportunities ofmilkproducts shallbemaintained fortheimplementation
period.
(3) LIPC imports annually milk products at137,202 tonswhole milk equivalents during the
implementation period asapartofcurrent access opportunities.
3. Export measures atthetariff linelevel
None.
4. Description ofinternal regulations andofagreements governing inclusion ofproducts intariff
headings orsub-headings (details omitted)
(1) Tariff classification rules : Customs Tariff Law
andtariff quota allocation Temporary Tariff Measures Law
(2) Specific sanitary regulations : Food Sanitation Law
Domestic Animal Infectious Disease Control Law
(3) State-trading byLIPC : Manufacturing Milk Producer
Compensation Temporary Law
D. Textordescription ofbilateral, plurilateral andmultilateral agreements
Country Schedule XXXVII -Japan.