Japan annually imports 5.4-5.7 million tons of wheat.  However, as for today, Russia cannot boast of large volumes of products supplies to Japan. Yet, having considered geographical proximity and affordable transportation through the ports of Russian Far East, Land of the Rising Sun is a promising trading partner for Russia. 

Trade relations system

Almost all wheat imported to Japan is purchased through a state-controlled supply chain. The Ministry of Agriculture, Forestry and Fisheries of Japan (MAFF) directly imports 600-800 thousand tons of wheat per year. The other 5 million tons of wheat are imported by MAFF-licensed private companies. 

Japan has a total WTO tariff rate quota for wheat of 5.74 million tons per year. In-quota wheat import is duty-free, and out-of-quota wheat import duty is 55 000 JPY/ton (~31 600 RUB/ton). At the same time, there is a mandatory mark-up for imported wheat intended for domestic sale, which level is regulated by MAFF depending on the state of market. 

In addition, Japan has a number of trade agreements with the US, Australia, Canada (under Asia-Pacific partnership, which also includes Vietnam, New Zealand, Mexico, and Singapore) and the EU countries. The agreements provide these countries with preferential terms for wheat export to Japan. 

For instance, Australia and Canada have a specific, gradually growing duty-free quota (50 thousand tons growing to 53 thousand tons by 2024), and a mandatory maximum mark-up for wheat imported from these countries and intended for domestic sale will be reduced to 9 350 JPY/ton (~5 400 RUB/ton) by 2026.

Under the agreement, the US also has a specific, gradually growing quota (150 thousand tons by 2024), with a maximum mark-up for domestic sale to be reduced to 8 500 JPY/ton (~4 900 RUB/ton). The mark-up for wheat purchased under the WTO tariff rate quota (5.74 million tons) will be reduced to 9 400 JPY/ton (~5 400 RUB/ton) by 2024. 

The EU countries have a significantly lower duty-free quota – only 270 tons of wheat by 2025 with a maximum mark-up for domestic sale to be reduced to 9 350 JPY/ton (~5 400 RUB/ton).

Obviously, this as well is one of the important reasons explaining why Russian wheat is not available on the Japanese market. 

Procurement mechanism 

All wheat purchased by MAFF is imported under the tariff rate quota and is exempt from import duty. Prior to the tendering process, MAFF consults with private companies to specify what class of wheat is required on the domestic market, and following the recommendations changes procurement volumes and specifications for tenders. The wheat purchased under the state-controlled system is imported duty-free.   

There are 2 ways to purchase wheat through the Japanese procurement system:

●       direct tenders which only include MAFF and MAFF-licensed companies;

●       simultaneous buy and sell system which only includes licensed companies. 

Direct tenders 

         Japan purchases wheat from the USA, Canada and Australia through direct tenders. Totally, Land of the Rising Sun imports 6 main wheat classes: (they represent 95% of all wheat import):

Three classes from the USA (~50% of import): 

1.     Western White (WW), a sub-class of soft White Wheat (SW).

Soft Wheat Wheat is primarily used to make biscuit cakes, Asian noodles, steamed bread, cookies, and crackers. Besides, this class of wheat is used for blending with Hard Red Spring Wheat (HRS) and Hard Red Winter Wheat (HRW) to improve the crumb colour, texture and volume of pot bread.

2.     Dark Northern Spring Wheat (DNS), a sub-class of Hard Red Spring Wheat (HRS).

A high content of protein and gluten in Hard Red Spring Wheat makes it suitable for producing bakery products such as yeast bread, hard rolls, hearth bread, whole grain bread, crescent rolls, and pizza crust. 

Hard Red Spring Wheat is also used as an additive to increase gluten content and quality in a flour batch. 

3.     Hard Red Winter Wheat (HRW).

HRW is mainly used to make bread flour, Asian noodles, hard rolls, and flatbread.  In addition, this class of wheat can provide a higher milling yield, therefore, it can be widely used for the production of whole grain flour products. 

One class from Canada (~30% of import):

1.     Western Red Spring Wheat (CWRS).

CWRS is a hard type of Red Spring Wheat, which is usually used to make crusty pot bread and Asian noodles with high protein content. 

Two classes from Australia (~20% of import):

1.     Standard White Wheat (ASW).

Standard White, or ASW, is a class that consists of hard, white grained wheat varieties. It is used to produce various bakery products, including Middle Eastern, Iranian, and Indian bread. It is also suitable to make steamed bakery products and instant noodles. 

2.     Premium White Wheat (APW):

APW is an Australian class of wheat used for the production of high-quality flour. It is suitable for a wide range of products, including different types of Asian and instant noodles. It is also ideal for the production of Chinese steamed, Middle Eastern, and Indian bread.  

Simultaneous Buy and Sell System

         Another method, a simultaneous buy and sell scheme, is used to purchase only 5% of wheat imported to Japan. Following the scheme, MAFF announces the quantity of grain required. Then, an exporting company and an importing company jointly bid to import a specified quantity of grain (an exporter sets a selling price, an importer sets a buying price). Thereafter, MAFF chooses the bid with the largest spread in prices (this spread becomes the mark-up for the domestic market) and allows purchase. However, only licensed companies have the right to use this method, so Russian importers should first receive all necessary permissions from the Japanese side. 

         Despite the fact that the Japanese market is now fully controlled by Russia’s competitors, there is no need to give up on it. Rosselkhoznadzor and its subordinate institutions are actively cooperating with Japanese colleagues to increase the export of Russian agricultural products to Japan, therefore, there are reasonable grounds to believe that Russian wheat will also become available in the Land of the Rising Sun in the foreseeable future.