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Kimie Harada

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Nippon Wine and Domestic Wine

Kimie Harada
Professor, Faculty of Commerce, Chuo University
Areas of Specialization: Finance, Finance Supervision and Securitization

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Japan is a special wine producing country

Japan is a wine producing country unlike any other. Ninety percent of Japanese produced wine is made from imported concentrated fruit juice to which water is added. In most countries in the world, however, it is forbidden to use water when producing wine. Grapes have yeast attached to them, which consumes the sugar content of the grapes and converts it into alcohol and carbon dioxide. This means that simply having grapes is enough to make wine, as the sugar content of the grapes is converted into alcohol without the need for adding sugar and yeast. The major wine producing countries strictly control chaptalization, but in Japan sugar is often added during the winemaking process.[1]

The production of wine by adding alcohol and water to imported concentrated fruit juice takes place within Japan, so the product is promoted as “domestic wine”. This “domestic wine” is a curious thing. Wine that uses imported materials, namely, reconstituted juice concentrate, rather than domestically grown grapes is made (i.e. bottled) in Japan and therefore distributed as domestic wine. Hence the term domestic wines came to be applied to wines that do not use domestically produced grapes.

Wine is an alcoholic beverage made from the fermentation of grape juice. Normally, only drinks made from grapes can be called wine, but in Japan drinks made from other juices are often called wine, too, such as apple wine and mango wine. In most countries, drinks made in this way from different kinds of fruit cannot be called wine. The distinct characteristics of Japanese wine are that winemakers are able to use ingredients not permitted in other countries (water and juices of other fruits) and label their wines as domestically produced even though they use imported ingredients. So why is Japanese wine distinctive?

  • 1: In Italy, Austria, USA (California, etc.), South Africa, and Australia chaptalization is prohibited under wine laws, but in France, Germany, New Zealand, Chile and other countries it is permitted with limitations on the type of wine, region of production, amount of sugar used, etc.

Why is Japanese wine distinctive?

The answer is because Japan has no wine law. Nearly every other country that produces and exports wine has a wine law, so most things such as the production region of materials and the types of grapes used are legally controlled.

In Japan where there is no wine law, wine is regulated by the Liquor Tax Law and Food Sanitation Act. Under the Liquor Tax Law (enacted in 1953 as a complete revision of the former 1940 Liquor Tax Law), wine is classified as fruit liquor. Alcoholic beverages made with mangos or apples can also be called wine, as can those made from dried grapes or concentrated fruit juice. Because an alcoholic beverage means a drink with an alcoholic content of 1% or more under Japanese law, the alcoholic strength of many Japanese wines also differs from wines of other countries. Furthermore, so long as the alcohol is fermented in Japan, the product can be labeled Produce of Japan without any breach of law.

The regulatory agency that deals with alcoholic beverages in general including licensing is the National Tax Agency, which is mainly concerned with taxing alcohol. Unfortunately, it does not question the methods of wine production or the rights and wrongs of adding ingredients.

What is Nippon wine?

There is awareness among wine producers that ignoring this problem of domestically produced wine is misleading consumers. A self-regulatory organization called the Wine Labeling Issue Review Council has established the Standards Concerning the Labeling of Domestically Produced Wine. These self-regulatory standards forbid wine that has been fermented in Japan using imported fruit juice to be labeled as Japanese produced (domestic) wine. Unfortunately, however, the standards have no legal binding force. Most wines sold in the lower price range of around 500 yen per bottle have been fermented in Japan using imported fruit concentrate.

There is a principle called Gresham’s law that states: “Bad money drives out good.” According to this principle, when a low-value currency (bad money, or gold coins with low gold content) starts to circulate in the world, high-value currencies (good money, or gold coins with high gold content) disappear from circulation (because people decide to hoard them) and the low-value currency comes into circulation more.

Wine, unlike currency, can be assessed by its bouquet and taste. In Japan, too, many winemakers go to great lengths to produce good wine. Some municipal bodies have begun their own systems of appellation control.

In recent years, the expression Nippon wine has emerged to mean wine produced from grapes grown in Japan (by real wine manufacturing methods). Among wine aficionados, high quality wine made using Japanese grapes is known not as domestic wine but as Nippon wine.

What the data shows

Nippon wine, like the good money in Gresham’s law, is alive and well but, unfortunately, less visible because it is overwhelmed by domestic wine, the bad money. The image of Japanese wine as being cheap and tasting bad is therefore difficult to shake off.

Ninety-nine percent of the raw materials used in wines made by small-scale wineries (those with a production capacity below 100kl) are produced in Japan (grapes grown in Japan). But this rate falls to a mere 7% in wines made by the large producers (eight companies with a specialization rate of under 80% and a production capacity of 500kl or more). The other 93% of what they produce is a boiled mash of imported fruit juice concentrate to which water and alcohol are added.

The number of small wineries that produce proper wine is 115 according to a National Tax Agency survey, although their scale is small. As a proportion of the volume of wine produced by the eight large producers, the wine produced by small wineries accounts for no more than 0.6%.

Hopes for the future

Recently, Nippon wines have started to win awards in international competitions. Consumption of Japanese wine has also been increasing year by year. The time has come to reconsider the circulation of bad money, namely domestic wines, in order to increase the production of good-money wines and their circulation in the market. There is also a movement to establish a wine law in Japan. I will be watching closely to see how this movement develops in future.

Kimie Harada
Professor, Faculty of Commerce, Chuo University
Areas of Specialization: Finance, Finance Supervision and Securitization
Professor on the Faculty of Commerce at Chuo University. She was born in Shiga prefecture. Graduated from the School of Economics, Osaka University in 1993, acquired PhD credits from the Graduate School of Economics, the University of Tokyo in 2001, gained a PhD in Economics from the University of Tokyo in 2003.
Concurrently serves as a member of the Financial Services Agency’s Financial System Council; technical advisor to the Fiscal Investment and Loan Program Subcommittee of the Ministry of Finance’s Fiscal System Council; member of the Ministry of Finance’s Independent Administrative Institution Evaluation Committee.
Holds the Wine Expert appellation qualification of the Japan Sommelier Association. Conducts extensive research centering on the financial field.
Website: http://c-faculty.chuo-u.ac.jp/~kimieh/index_j10.htmlnew window