Sake brewers rely on the US market but Trump’s tariffs might hit exports hard

It may be Japan’s most iconic alcoholic drink, but sake is suffering from a consumption crisis. 

Since its peak in the 1970s, Japanese consumption has dropped to a third of what it was, fuelled by an aging population and changing appetites among younger generations.

The industry knew it had to change, and 10 years ago it embarked on an ambitious strategy to drive up exports.

It was proving a success.

But that strategy has been thrown into turmoil after US President Donald Trump imposed sweeping tariffs on Japan.

“Raising tariffs may lead to strangling US domestic consumption,” said Masashi Sato from Tohoku Meijo Sake Brewery.

“I think it is very risky to rely on the US market.

“We would like to hedge the risk by expanding the number of export countries.”

Sake is a rice wine made from fermented rice, water, yeast and a unique mould called koji.

Higher-quality sake uses more polished rice, which removes outer layers of the grain that contain impurities and impact flavour.

Its flavour profile can vary widely, from sweet to dry, and it can be served warm or cold.

Unlike wine, the taste of sake is generally not region specific.

US market critical for exports

An hour and a half drive away from Tohoku Meijo brewery is Dewazakura Sake Brewery.

Its president, Masumi Nakano, was a pioneer in sake exports, first sending the rice wine to the United States in 1994.

“Sake, which is the representative drink of our people, is the last alcoholic beverage to make its debut in the world,” he explains.

While suffering a slow start, sake exports boomed over the past decade as the popularity of Japanese cuisine also surged.

Now sake exports make up over 10 per cent of sales, with the United States overtaking China as the number one destination.

In Yamagata, the United States makes up 40 per cent of sake exports.

But since Mr Trump’s sweeping tariff plan was announced, exports to the US have flatlined.

For brewers like Masumi Nakano, exporting to the United States is an economic necessity due to the sharp drop in demand among younger drinkers.

He hopes to double current exports to over 20 per cent of sales.

“Sake is becoming less and less familiar to young people, who nowadays tend to drink low-strength, sweet alcoholic beverages,” Mr Nakano said.

“All the national alcoholic beverages are struggling.”

But Mr Nakano holds bigger dreams than simply ensuring sales.

He hopes sake reaches the brand recognition of other iconic alcoholic beverages, such as Scotch whisky or French wine.

And if that can be achieved internationally, young people in Japan could also return to the drink.

“I also want to make Yamagata, my home ground, a mecca for sake,” he says.

“So that sake will spread like wine lovers visit Bordeaux, Burgundy and Napa, and people will feel they have to visit Japan.”

Trump tariffs drive up price

Mr Trump’s tariffs have sparked turmoil in export-orientated Japan.

Automobiles, Japan’s biggest export, have been slapped with a 25 per cent tariff.

Mr Trump also threatened a 25 per cent rate on all other tariffs, but this has been wound back to a 15 per cent tariff after a recent deal.

His harsh language and stern demands against Japan, an American ally, have been particularly striking.

He has accused Japan of using trade barriers to hurt US exports.

Australian sake demand soars

Over the last decade, Australia has emerged as one of the most promising international markets for Japanese sake.

“The Trump administration has wildly exaggerated the difficulty of getting past these trade barriers,” said political expert Jeffrey Hall from Kanda University of International Studies.

“They’ve made up fake trade barriers.”

He added Mr Trump’s attitude towards Japan is from a bygone era.

“They’re stuck in this mentality that back in perhaps the 1980s, there were much more serious trade barriers, but now those trade barriers are much less.”

The recent reduction in tariffs has been chalked up as a win at the political level, but many exporters, including sake, are unhappy as it’ll make their product less affordable.

Cost of rice hits producers

Adding to the price woes is the cost of rice.

Japan is suffering a rice shortage due to recent poor harvests and a boom in international tourists flocking to Japan.

The rice shortage is so severe the government had to open reserves to lower costs.

The price of sake rice shot up 30 per cent in a year, an unprecedented amount.

Kenji Koga is the chief director of the Yamagata trade body, known as Jetro.

“The increase in the price of rice is the biggest concern for sake breweries,” he said.

“If the price increases further due to the Trump tariffs, people are very concerned that the market competitiveness of sake will decline. They have no choice but to raise the cost of their products.”

During a recent trip to the US, sake brewer Masashi Sato was shocked to see sake selling for exorbitant prices.

“I found that they sell our sake at prices several times higher than the prices we sell wholesale in the US,” he said.

“The price is usually in the range of $70 or $100 per bottle. The middle-class people think that sake is something special.”

His aim is to drive down prices, to make it more accessible.

But — with rice shortages and Mr Trump at the helm — this dream may have to be put on ice.

“We want to reach as many people as possible, not only in Japan but also in the US.”