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Business Trends

The rise of 'made-in-Japan' Chinese herbal remedies

Drugmakers shift from reliance on imported ingredients as demand increases

Farmers in Kyushu grow bupleurum, a yellow flower used to produce several traditional Chinese remedies.

TOKYO -- With the market for traditional Chinese herbal medicines going from strength to strength, Japanese makers of the remedies are increasingly starting to source raw ingredients at home, rather than importing them from China. 

An hour and a half by car from Kagoshima Airport in Kyushu, the southernmost of Japan's four main islands, lies a great swathe of grass that turns bright yellow in September as the field's crop comes into bloom. Bupleurum, as the plant is known, is used in remedies for everything from the common cold to symptoms of dementia.

A local farmers' partnership in the town of Asagiri produces around 20 tons of the crop annually in the 64-hectare field, providing them to Tsumura, Japan's largest producer of traditional Chinese medicine.

One member, Toru Furuyama, said he had "turned to bupleurum as tea-leaf prices began falling." Another, Naoki Minakoshi, pointed out that many medicinal herbs did not require large upfront costs, such as for building greenhouses.

Tsumura controls more than 80% of the herbal medicine market in Japan and buys thousands of tons of ingredients every year -- about 80% from China and 15% at home.

The drugmaker is now trying to expand its domestic procurement network. The amount of Japanese herbs it buys increased some 40% between fiscal 2006 and 2016, although the percentage as a part of total procurement has stayed roughly the same. About a quarter of the 120 or so herbal

 ingredients the company uses are grown domestically.

As part of the drive, Tsumura has been trying to assist contract farmers by providing rental machinery and guidance on growing medicinal herbs.

Company staff visit farms several times a year to check on progress and give practical advice on issues such as optimal harvest times. "I want our contract farmers to be highly aware that their crops are used for medical products," said Kohei Takabayashi from Tsumura.   

The company's push for more homegrown herbs was prompted by a steady rise in demand for Chinese herbal medicines in Japan's aging society.

Ryuta Fujii, president of Ryukakusan, a drugmaker with more than a century of history, is keen to take advantage of the brand value of "made-in-Japan" products. 

The company, which is famous for sore throat and cough remedies, is currently shifting from a reliance on bellflowers imported from China to ones grown in Akita Prefecture, northeastern Japan, for its Ryukakusan Direct medicine.

Fujii also said the company was increasingly receiving inquiries from herbal medicine makers in Hong Kong about Japanese-grown ingredients.

Ryukakusan has collaborated with the Tokyo Crude Drugs Association by sending specialists to contract farms to help raise yields. One idea provided was to use vegetable-peeling machinery for bellflower processing, bringing down the workload for farmers who had been peeling the plant by hand.

Japanese drugmakers have even established a reputation for Chinese herbal remedies in their land of origin. Many Chinese consumers are said to have misgivings over the reliability of homegrown remedies and buy up Japanese products when they visit.

It is not uncommon for tourist guidebooks to contain information about Japanese herbal medicines and there is plenty more available online. The country's drugmakers are keen to push fully Japanese products to Chinese shoppers.

At the same time, the price of medicinal herbs, like many other goods, has been rising in China at a much faster pace than in Japan.

According to industry body the Japan Kampo Medicines Manufacturers Association, or JKMA, the average price of Japanese medicinal herbs rose from 2,494 yen ($22) per kilogram in fiscal 2006 to 3,019 yen in fiscal 2016. Over the same period, the price for Chinese herbs more than doubled to 1,570 yen, from 690 yen.

Chinese ingredients may still be cheaper, but Japanese drugmakers remain determined to shift reliance to homegrown herbs. 

Takeda Consumer Healthcare, a subsidiary of Takeda Pharmaceutical, is seeking ways to reduce the costs of domestic herb production in areas such as cultivation control and distribution, with the eventual goal of making Japanese herbs as affordable as those from China. 

Takeda Consumer has worked on the cultivation of medical rhubarb since 1956, when it was still part of the parent company. It began growing Shinshu Daio, its own hybrid of the plant, in Hokkaido in 1969.

The rising prices of medicinal herbs in China hint at growth in demand outpacing that of supply. An executive from a Japanese herbal drugmaker warned that there could be serious shortages of Chinese herbs in just 10 years' time.

Buyers in China are increasingly looking to secure ingredients before overseas players. To avoid excessive price hikes, Beijing could impose restrictions on exports -- in the worst-case scenario for Japanese producers, they would be unable to import medical herbs from China.

Overall, however, the future looks bright for the industry in Japan. The country's market for herbal remedies stood at 148.1 billion yen for fiscal 2016, a 56% rise over 10 years, based on official drug pricing, according to IMS Japan in Tokyo.

It is not only the growing numbers of elderly Japanese that are keen on the products, an increasingly health-conscious younger generation is also starting to favor herbal remedies.

Kracie Holdings last year began advertising some of its herbal remedies in women's lifestyle magazine an-an and collaborated on package designs of certain products.

Herb growers, for their part, can expect stable sales. The JKMA and Japan's agriculture ministry in fiscal 2013 began organizing events bringing together farmers who are interested in growing medicinal herbs and potential partner businesses.

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