$17 Japanese Apples For a Ka-Ching Dynasty
China's Newly Rich Gobble Boutique-Fruit Exports

By Anthony Faiola
Washington Post Foreign Service
Thursday, December 15, 2005

HIROSAKI, Japan -- Inside a fragrant warehouse in this snowy northern village, orchard farmer Hisanobu Katayama watched as his workers gingerly boxed what he proudly called "the Rolls-Royce of apples." As big as softballs and as shiny as gems, the precious produce typically goes from the farm to the glitzy retailers of Japan's big cities -- where the high prices charged for such fruit have earned this nation its reputation as the land of the $15 apple.

But this year, the most costly crates of Katayama's "Japan's Best" apples are bypassing Tokyo's chic Ginza district and heading to China instead. There, Japanese apples are being scooped up by the Lamborghini-driving, Gucci-toting nouveau riche in Beijing and Dalian at $17 a piece, or roughly 100 times the price of a Chinese apple. Some of the finest specimens, with dragon designs and Chinese characters in their peels, retail for more than $100 each.

Katayama's exports to China have soared from two to 20 tons over the past three years despite China's rank as the world's largest apple producer. As developing nations press the industrialized world to open their doors to cheaper foreign produce during the World Trade Organization meeting in Hong Kong this week, Katayama's success explains how he and his peers hope to prosper in the age of globalization -- by cultivating an export market for boutique fruit.

"We've discovered that the richest Chinese are now willing to pay more than a Japanese for the best possible apple," said Katayama, 45, whose apples are also popping up inside London's Marks & Spencer and the banquet halls of Taipei. "The more expensive it is, the more they want it. That's great news for us, because it is the only way Japanese farmers are going to survive."

The crates of "Japan's Best" apples being shipped overseas are only part of a niche-market export boom from high-end Japanese farms. It includes $240 musk melons flying off to Thailand, $3 strawberries heading to Hong Kong and $170 square-shaped watermelons carted to Kuwait.

Officials estimate Japanese fruit exports will hit at least 25,000 tons in 2005, or more than double the 1999 figure. While Japan's total agricultural exports of $2 billion still amount to only 2 percent of its overall farm production, government officials are stepping up marketing efforts with the goal of doubling exports within five years. "Japan may well be beaten by developing nations with cheaper farm and fishery products," Prime Minister Junichiro Koizumi said at an agricultural conference in Tokyo this year. "But I think Japan can still compete on the international market -- by exporting more expensive and delicious goods."

Though Japan, the world's largest net importer of foodstuffs, has steadfastly maintained some of the world's highest agricultural tariffs, the number of Japanese farmers plummeted to an all-time low of 3.6 million in 2004, compared with almost 8 million in 1975. Young rural people have migrated to Japan's big cities, leaving a disproportionate number of seniors to tend farms. As they die off, Japanese society is fretting about the future of this nation's ancient and particular food culture.

To be sure, through luxury fruits the Japanese are exporting their own culinary aesthetic. Apples in Japan, for example, are prized as much for beauty as for taste. On Japanese farms -- almost all of which are small-scale operations -- even slightly blemished apples are discarded for juice and jams while production is limited to grow fewer but better quality fruit.

Clearly not everyone in Japan can afford a $15 apple. But even in the domestic market -- still by far the most important for Japanese farmers -- agricultural producers and sellers are focusing increasingly on the high-end niche market.

At Sembikiya, a pricey fruits retailer in Tokyo's fashionable Nihonbashi quarter, sales have risen 30 percent over the past decade while the company has grown from eight to 13 branches nationwide despite Japan's long economic downturn. Customers are greeted with classical music as they shop in a gallery space-meets-supermarket environment. Musk melons, for instance, are displayed against soft lighting, priced from $100 to $350 depending on the intricacy of the gorgeous lattice patterns cultivated into their skins.

Customers acquiring the most expensive fruits are ushered to a back table to complete their transactions while contemplating cups of warm passion fruit juice provided by white-gloved attendants. For years, the firm's clients have been almost exclusively Japanese. But in the past two to three years, foreigners have begun to make up a significant percentage of company sales.

"There is a lot of interest from the oil money states in the gulf -- the sheiks like the musk melons," said Ushio Oshima, Sembikiya's executive planning director. "But most of our foreign clients are Asians who share Japan's culture of giving fine quality fruit as gifts."

To push into new markets, the Japanese government is doubling its agricultural export marketing budget to $11 million next year. But critics chide Japan for doing so while maintaining high tariffs on foreign food, which can reach up to 800 percent, for instance, on rice. High domestic farm subsidies, meanwhile, amount to about 1.4 percent of the gross domestic product, a figure greater than the entire value of Japan's annual farm production, according to a 2004 WTO report.

Japanese consumers have paid the price. Tokyo residents, according to a recent government survey, pay 13 percent more than New Yorkers, 22 percent more than Londoners and 42 percent more than Singaporeans for food.

Some fear Japan's efforts in the high-end food market are merely a way to disguise new subsidies to farmers. Yet other longtime critics of Japan said a focus on boutique fruits could provide Japan's farmers a cushion as import tariffs drop.

"Look, the odds are against them when it comes to large-scale agriculture; it's just too expensive for them to do it," said Flavio Soares Damico, head of the Agricultural and Commercial section of Brazil's Foreign Ministry. Brazilian officials have noted it costs Japanese farmers in Okinawa $1,000 to produce a ton of sugar, compared with production costs of $100 to $200 for farmers in Brazil. "But smaller-scale, high-end produce is a real alternative for them. And it is something they do well."

Perhaps nowhere is that more true than in Hirosaki, a village in Japan's apple-growing region of Aomori, about 370 miles north of Tokyo. In the foothills of snowcapped mountains here, apple exports have grown from 2,000 to 15,500 tons over the past decade.

This is the home of Japan's cornucopia of luxury fruit. The fragile Mutsu apple, individually covered in bags on the branch until one month before harvest, when they are unwrapped and sunburnt a glossy pink. The Sunmutsu, softball-size and the pale shade of late daffodils. The mammoth Sekai Ichi, its peel a deep red with glorious crimson starbursts. Though the best retail for more than $15 each, most apples grown here can be bought for less than $1.50.

Despite their high prices, Japanese apples have succeeded in places like Taiwan, which had long been dominated by U.S. apple growers. Japan has taken 15 percent of the imported apple market there over the past four years as wealthy Taiwanese have shown themselves willing to pay more for Japanese-grown fruit.

The battle for survival will depend equally on the ability of Japanese farmers to maintain their lead at home. In the 1990s, U.S. farmers gained hard-fought entry for Red Delicious apples in Japan, which were offered at lower prices. Nevertheless, few Japanese bought them, citing inferior taste. Last month, however, U.S. producers won a fight in the WTO to expand exports in Japan to a wider variety of American-grown apples, including Japanese Fuji apples now grown in Washington State.

Katayama, however, is confident that Japanese farmers will prevail.

"A [$1] apple tastes like a [$1] apple," Katayama said. "A [$5] apple is more juicy, more sweet, more beautiful to look it. They are a completely different fruit, and consumers who can afford it will want the best."

Special correspondent Sachiko Sakamaki contributed to this report.