Growth in horticultural trade: Japan's market for developing countries

This paper explores possibilities and opportunities of expansion of horticultural exports from developing countries through an investigation on a rapidly growing market, Japan, as an example among major promising markets. In this paper six horticultural commodities are selected to analyze, emphasizing on exports from developing countries. Observations on Japan's horticultural imports make us presume that consumers differentiate products by place of production. Therefore, import behavior is considered in a two‐stage budgeting procedure. The second‐stage demands for imports from different sources are specified in an almost ideal demand system (AIDS) model and estimated statistically as well as the first‐stage import demand equations. The estimated second‐stage AIDS equations show that the magnitude of own‐price coefficients varies with the source of imports and so does that of expenditure coefficients. Therefore, the characteristics of import demand on a commodity basis, which are captured by the estimates of the first‐stage import demand equations, are not equally transmitted to the demand for imports by source in each commodity. The estimated coefficients of the first‐stage import demand and the second‐stage AIDS equations were combined to obtain the total effects of price and income changes on imports by source. The calculated own‐price elasticities are greater than one in absolute value in ten of the 15 cases and so are the calculated income elasticities in twelve cases. The large elasticities promise suppliers that they benefit from Japan's income growth and that they increase their earnings if they can reduce the price by lowering their costs. However, factors in non‐price competition also play import roles in the import growth. In this paper, the importance of sales promotions by exporters and preshipment inspections was indicated in the cases of mangoes and cut flowers. Other factors such as market structure and public infrastructure for post‐harvest activities were also discussed.