The world’s appetite for Japanese tuna, Wagyu beef, and other delicacies prized in restaurants as far away as New York and London is behind an unusual investment trend in Japan. Institutional investors and regional banks, chasing returns they hope will be as high as 7 percent, have poured at least 23 billion yen ($281 million) into about a dozen funds that invest in Japanese farms and fish ponds.
Four of these food industry funds are managed by former Citigroup (C) banker Daisuke Mori, who has pooled 10 billion yen from regional banks and institutional investors to put into projects including tuna farming, most of them on the southern island of Kyushu, far from the radiation contamination caused by last year’s earthquake and tsunami. “Food is the one area that has a big investment potential,” says Mori, 44, president of Dogan Investments in Fukuoka City. “Locally farmed tuna, pork, and beef on Kyushu island should get a stronger connection with the big market outside of Japan.” Ryohei Hayashi, a senior Dogan manager, says the latest of its funds, which are closed to individual investors, is targeting a 7 percent return this year.
Global demand for Japanese food products has led at least 25 regional banks to increase lending to farmers who want to export abroad. Mori, who ran Citigroup’s Fukuoka branch during his six-year tenure at the bank, has invested 48 million yen in fish processor Burimy, which breeds hundreds of thousands of bluefin tuna and yellowtail in pens about half a mile offshore. The company plans to sell 2,000 farmed tuna this year and to more than double sales next year, says Takahiro Hama, a company director. Burimy is talking with Tokyo-based Nomura Holdings (NMR) about an initial public offering to fund export growth in the Middle East and Europe, says Hama.
The tuna farm exports about 40 percent of its fish, mostly to stores and restaurants in California and New York, including Morimoto, a Manhattan restaurant owned by Masaharu Morimoto, star of the TV show Iron Chef. (Tuna pizza served on a crispy tortilla with olives is a specialty.) Japan’s exports of tuna and yellowtail climbed 16.9 percent and 18.1 percent, respectively, in 2011 from the previous year, to 7.36 billion yen and 7.76 billion yen, according to Japan’s Ministry of Agriculture, Forestry, and Fisheries.
Japan’s regional banks, faced with anemic lending rates of 1.04 percent, also are seeking to capitalize on the popularity of Japanese delicacies. Kagoshima Bank, based in Kyushu, has increased loans to farmers willing to concentrate on specialty foods for export rather than rice or sugarcane for domestic consumption. Agricultural lending by the bank rose 3 percent from the previous year as of Sept. 30. Average loans outstanding in Japan declined for a second consecutive year.
Among farmers benefiting from the lending increase are those raising Wagyu beef and Kagoshima black swine, says Masanaka Mei, head of trade promotion at the bank, who has accompanied the lender’s president, Motohiro Kamimura, on trips to Asia and Europe along with customers to scout out markets. Wagyu cattle, including those from Kobe in western Japan, are a Japanese breed known for the tenderness and marbled texture of its meat. Black swine, trademarked as Kagoshima Kurobuta, are a rare breed of pig whose meat has high fat content and is prized for its texture and flavor.
Nomura has set up a sweet mini-tomato farm joint venture with wholesaling company Wago and has tapped former stockbroker Shigekazu Wakabayashi to oversee the operation. Instead of hitting the road to visit brokerage clients, Wakabayashi these days rises at 7 a.m. and dons a T-shirt, jeans, and boots. “It’s a big change in my life, turning into a farmer from a securities salesman,” he says.