SEOUL, KOREA - Japan will raise the consumption tax rate from the current five percent to eight percent on April 1, 2014, and then to ten percent from April 2015 to vitalize its sluggish economy. Consequently, experts expect a food price hike and a corresponding drop in consumer demand.
Ministry of Agriculture, Food and Rural Affairs (MAFRA) minister Lee Dong-phil and Korea Agro-Fisheries & Food Trade Corp. president Kim Jae-soo analyzed the likely impact of the tax increase on Japan’s food market and Korea’s export of agro-food, presenting a mid and long-term plan to expand export to Japan.
Ahead of the consumption tax hike, Japan has seen an increase in demand for preservable foods including cooking oil, soy sauce, bottled water, cup noodle, frozen food, canned food, as well as a temporary increase in consumption due to special sales promotion of retailers. Although demands for processed foodstuffs will somewhat decrease following the tax increase, the purchase rate of staple items like fresh food will not be affected by the price increase. When the tax increased from three percent to five percent in 1997, consumer purchase power renormalized within two months.
In case of increased taxes on consumer prices, Japan’s retail giants will struggle to survive by expanding the configuration rate of PB products in order to lower product prices, increase import of raw material in order to reduce unit cost through adjustment in composition of raw material, and increase online sales in order to reduce distribution cost.
In mid to long run, it is likely that essential food commodities such as Korean paprika, tomatos and strawberries will not be significantly affected, and that sales of ‘third beer' (which use such alternatives as pea protein, soy protein, or soy peptides), some beverages and liquor that have a strong price edge in Japan will increase.
aT will track responses from consumers and businesses in Japan, and find ways out of difficulties through joint development of PB products with Japanese companies that depend on Korean raw material, expansion of advancement into the ingredients market, and expansion of promotion linking with online sales. Data is available on www.kati.net.
“Japanese consumers will purchase cheaper products to save money due to the tax hike. We will do our utmost to expand the market advancement of vegetables, goods well-equipped with traceability systems that are highly likely to be replaced with imported goods, and commercial foodstuff”, said Park Jong-seo, director of aT.
