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Japan Eyeing Produce as the Country's Next Toyota

Kaori Enjoji|Tokyo Bureau Chief, CNBC Asia Pacific
Thursday, 21 Oct 2010 | 5:54 AM ET

It’s 7am at Japan’s largest wholesale market and dozens of buyers wade through the fragrance to hunt for matsutake. Plenty of delicacies tempt the palate this time of year, but for the Japanese, these mushrooms conjure the arrival of fall like no other.

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Along with its faint woodsy aroma, matsutake are equally prized for their price. One perfectly proportioned stem can cost 10,000 yen ($12) at retail.

“Japan has the most stringent standards for vegetables,” says Masahiko Nogami at Kinokuniya, an upscale supermarket. “Japan has unrivaled technology in taking a seed and improving the quality to the point of perfection.”

From sushi to tempura, Japanese cuisine has fans around the globe. When it comes to the fresh produce needed to create them though, the pickings overseas are slim.

The government hopes to change that. In search of new growth engines beyond automobiles and electronics, Japan says it will try to achieve “growth by opening up new frontiers” in industries like agriculture and tourism.

Japan plans to more than double agricultural and food exports to one trillion yen ($12.3 million) by 2017. It also wants the nation to be self-sufficient for half the food it consumes by the next decade.

Matsutake Being Auctioned
Scenes of matsutake being auctioned at a market in Japan.

“One reason why prices are high is because farming is still done on a very small scale, which tends to lower productivity and efficiency,” says Shinichi Shogenji, dean of the graduate school of Agricultural and Life Sciences at the University of Tokyo. “Material costs, including labor, are also high.”

Since most farmers belong to Japan’s national organization of farm cooperatives, or JA, the body has often been called an invisible but powerful coalition. The body broadened its reach in the 1960s as it benefited from the government’s system of controlling the distribution and pricing of staple foods, such as rice. Structural reforms to make Japan’s agribusiness more open and competitive in international trade were started during the bubble years, but analysts say progress has stalled.

Shoppers at upscale supermarlet Kinokuniya. Many families still shop daily at their local market for fresh ingredients.
CNBC Asia Pacific
Shoppers at upscale supermarlet Kinokuniya. Many families still shop daily at their local market for fresh ingredients.

“I can not deny that they exercise their political power,” Shogenji says, adding that their ties to government may be changing after the Liberal Democratic Party lost in elections last year.

JA Bank is also one of the world’s biggest private-sector investors. It has 85 trillion yen in deposits, two-thirds of the world’s biggest financial institution, Mitsubishi UFJ Financial Group.

For now, it is unlikely that Japan’s farmers will be able to do to fungus what Toyota did to cars. Regulatory hurdles aside, there’s even a loose hierarchy for who gets to savor the season’s best crop. As the saying goes here, “Don’t let your daughter-in-law eat fall eggplants.”

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