Japan is a relative latecomer in the field of modern biotechnology. The dependence on US biotechnology companies is gradually diminishing because of the increased domestic investment in basic research. The main biotechnological applications have already taken place especially in the pharmaceutical sector and to a lesser extent in the non­food agricultural sector. In food processing, the sector in which Japan has long­term experience in traditional biotechnology, no major applications are foreseen in the near future.

In the early 1980s, many Japanese companies entered the field of new biotechnology. These companies not only included traditional food, pharmaceutical, and chemical companies, but also many companies with totally unrelated core businesses, such as steel manufacturers and even construction companies. Unlike in the USA where start­ups were dominant, the first Japanese companies which invested in biotechnology were already large established companies, or formed part of a large industrial group. Many corporations conceived biotechnology as a welcome opportunity to diversify their business, a characteristic activity of Japanese industry in general, because of falling profit rates in their core business (for example in chemistry). Biotechnology showed attractive prospects because of the expected high rates of return and the potential to become less dependent on oil­based products and energy consuming production methods. The two oil crises had revealed a Japanese high dependence on oil.
In the 1990s, however, the 'biotech boom' ended. Several companies stopped or reduced their research in biotechnology, while others were much more cautious about the commercial possibilities of biotechnology. Nowadays, the most successful companies in biotechnology include food and beverage enterprises, pharmaceutical and chemical companies. Presently, about 800 companies are involved in biotechnology R&D.

Market
In 1993, the size of the market for biotechnology products was about US$ 5.2 billion, an increase of 37 per cent compared to 1992. Pharmaceutics (biomedicines) alone accounted for 84 per cent of the sales, while other biotechnology products, mainly rDNA enzymes and cell cultures of seedlings of flowers, occupied only small market shares. The export of biotechnology related products is negligible. The Japan Bioindustry Association (JBA) estimates the market size of all biotechnological products by the year 2000 at about US$ 33 billion, of which 44 per cent will be accounted for by pharmaceutics, 29 per cent by foods, 12 per cent by chemicals, and 8 by agriculture.

R&D alliances on biotechnology
About 80 per cent of R&D on biotechnology is financed by the private sector, while the remaining 20 per cent is funded by government. The weakest link of the Japanese biotechnology industry is still its lack of basic research. Especially in its early stage, Japanese biotechnology development depended heavily on technology imported from the USA, which is illustrated by the fact that Japanese companies established at least 375 strategic alliances with US biotechnology companies since 1981. The collaboration was considered profitable for both parties: the US companies, especially the start­ups, were hungry for venture capital and the Japanese corporations needed access to innovative products and new technologies.
Japanese companies, however, have increased their in­house basic research. This is also reflected in the increasing relative number in 1993, compared to 1992, of early­stage R&D agreements together with a decreasing relative importance of later­stage marketing/licensing agreements with US biotechnology companies. Also the share of alliances which include (bio­)technology transfer agreements from Japan to the USA, is gradually increasing. Nevertheless, in 1993 the number of agreements including technology transfer from the USA to Japan is still 4 times the number of agreements on technology export from Japan to USA. The fact that the Japanese biotechnology industry is a net importer of technology leads to an unfavourable position in negotiations on licensing. It may also affect the globalization of the Japanese biotechnology sector, since exports are often restricted in license agreements.
The reliance on the USA has given rise to many conflicts about supposed infringements of US patents by Japanese companies. US companies accuse Japanese companies of "inventing around", i.e. making minor changes to protected biotechnological inventions in order to apply for a new patent. According to US companies, the practice of inventing around is generally accepted in Japan considering its poor patent protection, which in practice favours the interests of Japan's industry. An illustrative example is the controversy between the US company Genentech and the Japanese company Sumitomo Pharmaceuticals around t­PA, a drug used to dissolve blood clots to treat heart attack patients. Genentech obtained its Japanese patent for its t­PA after filing in 1983. Sumitomo successfully applied for a patent for its own t­PA, the function of which is the same as that of Genentech's t­PA. In Sumitomo's t­PA, however, 1 of the 527 amino acids is different, while the rest of the sequence remained the same. According the Japanese court's ruling, because of this difference, Sumitomo's t­PA does not infringe Genentech's patent rights. Despite the pressure of Genentech and other foreign biotechnological companies to place more stringent patent rules on genetic engineering techniques and related products, the Japanese government is not currently considering revision of patent law or examination standards for industrial patent applications.

Pharmaceutical sector
Japan is one of the world's largest markets of pharmaceutics. In fiscal year 1989, the market reached a value of US$ 52 billion. About 8 per cent of all pharmaceutics is imported, 17 per cent is manufactured by foreign companies, while an additional 20 per cent is produced by a Japanese company under a foreign license. The other 55 per cent of the market is shared by 1500, mostly small or medium­scale, domestic drug companies. No single company is holding a dominant market position.
Apart from the traditional pharmaceutical companies, many food/beverage and chemical companies stepped into the market using rDNA and monoclonal antibody technologies for the production of new drugs. Their main motivation is the promising market outlook, due to the ageing Japanese population and the high added value nature of pharmaceutics. A major force to develop new drugs is found in the Japanese health insurance system, which secures high prices for new products. Prices of older medicines are automatically reduced every two years. Nearly all Japanese companies concentrate their business on the domestic market: the export of Japanese pharmaceutics is a negligible 3 per cent of the production. They mainly focus on products associated with cancer, gastric ailments, hepatitis, and diseases of the elderly.

In 1994, 14 biomedicines were marketed in Japan and reached a market share of 7 percent. The most successful biotechnological drug is interferon produced in cell culture, which is used in the treatment of hepatitis­C. Important manufacturers are Takeda Chemical, the largest Japanese drug company, and Yamanouchi. Other successful biomedicines produced by rDNA technology are human insulin by Shionogi, human growth hormone by Sumitomo Chemical and Yamanouchi, granulocyte colony stimulating factor (G­CSF) and erythropoietin (EPO) by Chugai, Kirin and Sankyo.

Food sector
Japanese food companies such as Ajinomoto, Meji Seika, Kirin and Suntory have strong experience in fermentation techniques. Food stuffs such as miso or natto (fermented soya), soya sauce, and beverages such as sake and beer are part of the traditional Japanese kitchen. At present, genetically­engineered foods have no priority. It is expected to take at least until the year 2000 before these products are widely introduced in Japan. The domestic food companies pay more attention to penetrating the pharmaceutical and agricultural sector than to developing rDNA food stuffs.
At the moment the application of biotechnology is changing direction. Some research is being conducted to develop so­called 'functional' or 'designer' foods. These food are consumed for the purpose of specific health benefits, such as stimulation of the immune system, prevention of allergic reactions, regulation of physical condition, and the reduction of the risk of cancer. These characteristics should be achieved through the addition or the removal of food ingredients. An example is Shiseido's production of rice for people allergic to rice globulin. The rice is treated with a protease to remove its globulin. In 1993, the first functional foods were marketed, but until now their market share has been small.

Agribusiness and plant breeding sector
Japanese agriculture has always been a highly protective sector. Recently, a new phase has started with the first forced market liberalizations, for example for rice. Since 1994, rice import has been allowed, which will result in strong competition from abroad. The use of advanced plant breeding materials, especially for rice, vegetables and flowers is envisaged as a way to cope with this new competition.
The Japanese seed market has a value of about US$ 1 billion, of which 30 per cent is rice, 50 per cent vegetable seeds and 20 per cent other seeds. Research in plant biotechnology is especially directed at rice. Its main aim is to shorten the breeding and growing time. This is now done by using embryo culture, cell fusion and protoplast culture. Also research on transgenic rice is being carried out, the future profitability of which, however, is very doubtful.
The main players in plant biotechnology are Japan's largest pesticide producer Sumitomo Chemical, seed and pharmaceutical company Mitsui Toatsu, beverage company Suntory, the world's second largest tobacco producer Japan Tobacco, Mitsubishi's Plant Research Institute and brewer Kirin, and the national organization of agriculture co­operatives Zennoh.
Markus Heissler/Peter Commandeur

Sources
Brian Eisenburger and Tokuo Yoshida (1994), Japanese Biotechnology in the Nineties. Tokyo: Royal Netherlands Embassy.

William O. Bullock and Mark D. Dibner (1994), "The Changing Dynamics of Strategic Alliances between US Biotechnology Firms and Japanese Corporations and Universities." Trends in Biotechnology, vol.12, October 1994, pp.397­400.

"Genentech Appeals Court's Decision that Sumitomo's t­PA didn't Infringe." World Intellectual Property Report, vol.9, 1995 , p.14.

Robert T. Yuan and Mark D. Dibner (1990), Japanese Biotechnology: A comprehensive study of government policy, R&D and industry. New York: Stockton Press.