In recent years, the development situation of the Japanese tea industry has become increasingly severe. It is undergoing an unprecedented transformation. Standing at the crossroads of traditional and emerging markets, it faces the dilemma of a shrinking domestic industry while simultaneously being pulled into the vortex of explosive growth brought about by the global matcha craze.

1. The Fundamentals: Hot Abroad, Cold at Home

1. Shrinking Tea Gardens and Declining Production Since peaking at over 100,000 tons in 2004, Japan’s tea production has gradually fallen back to the 70,000–80,000 ton level.

• According to Japan’s Ministry of Agriculture, Forestry and Fisheries, the total tea garden area in 2024 was approximately 29,400 hectares, a decrease of 700 hectares from 2023.
• National raw tea production was 74,000 tons, a year-on-year decrease of nearly 1,300 tons.
• Export Data: According to the latest statistics for January–December 2025, Japan exported 12,600 tons of tea with a value of $460 million (avg. price $36.58/kg).
  • To the US: 4,400 tons, $188 million (avg. $42.37/kg).
  • To the EU: 1,900 tons, $89 million (avg. $46.03/kg).
  • Powdered Green Tea (Matcha): 8,718 tons (+71%), Value: $400 million (+124%), Avg. Price: $44/kg (+30%).

2. Concentration of Main Production Areas Shizuoka, Kagoshima, and Mie prefectures account for over 70% of the national tea garden area. In 2024, Kagoshima Prefecture (27,000 tons) surpassed Shizuoka (26,000 tons) to become Japan’s largest tea-producing prefecture.

3. Diversity of Tea Categories

• Sencha: Accounts for 54.4%, the mainstay of daily drinking.
• Tencha (Matcha raw material): Accounts for 4.3%, with the highest average price (approx. 3,278 JPY/kg).
• Bancha: Accounts for ~35%, made from coarser, older leaves.
• High-grade teas (Gyokuro, Kabusecha, etc.): Combined account for less than 6%.

4. Domestic Trends: “Less Leaf, More Beverage” The average annual household spending on tea in Japan is only about 500 RMB. The market is shifting toward tea bags, powdered tea, functional tea drinks, and seasonal limited-edition products. despite efforts to strengthen tea culture education in schools, the fundamentals remain bleak.

• The industry’s average annual output value is about 88.3 billion JPY (approx. 5 billion RMB).
• Price Drop: The average price of Sencha has dropped from a peak of ~2,000 JPY/kg in 2004 to 1,291 JPY/kg (approx. 70 RMB/kg) in 2024. This downward trend mirrors the rise in PET-bottled green tea production.

5. Structural Adjustment Production of Ichibancha (first flush spring tea) is decreasing, while Sanbancha and Yonbancha (summer/autumn tea used for bottled drinks) are increasing. Meanwhile, demand for Tencha (the raw material for matcha)—though less than 5% of total output—is rising, leading to continuous production increases.

2. Matcha: Green Gold in the Eye of the Storm

Despite the overall industry facing shrinking acreage, labor shortages, and rising costs, matcha has become a highlight of contrarian growth.

1. The Global Matcha Craze Driven by its vibrant color, health attributes, and cultural depth, matcha has formed a global trend via social media. From Starbucks matcha lattes to various food and beverage integrations, matcha has moved from traditional tea ceremonies to mass consumption, sparking a quiet revolution.

• Market Forecast: The global matcha market size is expected to grow to $7.43 billion by 2030, with a CAGR of 7.9% from 2024 to 2030.

2. Severe Domestic Supply-Demand Imbalance Explosive global demand has led to tight supplies and soaring prices.

• Price Surge: In 2025, matcha prices in non-Kyoto regions rose by 40%–70%, while Kyoto Uji matcha prices soared by 200%–300%.
• Production Bottlenecks: Only about 100 factories in Japan can produce Tencha, and building a new factory requires millions of dollars. Additionally, a sudden temperature drop in the Kyoto area in Spring 2025 led to a reduction in top-tier Uji matcha yield.
• Chain Reactions:
  • Importers are hoarding stock, causing factory backlogs.
  • Retailers are selling ordinary matcha labeled as “Ceremonial Grade” at high prices.
  • Farmers are switching from Sencha/Gyokuro to Tencha production.

3. The Tug-of-War: Culture vs. Commerce Behind the prosperity lies a cultural concern. Excessive focus on export-oriented production may hollow out domestic tea culture, impacting traditional tea ceremonies and the local market. The market is also seeing issues like the abuse of marketing labels (e.g., “Ceremonial Grade”) and price disruption due to hoarding.

3. Global Trade Expansion and Supply Chain Reshaping

1. Matcha Props Up Exports Japan’s tea trade is characterized by “steady imports, rapid export growth.” The government is systematically promoting exports through the “Strategy to Strengthen Exports of Agriculture, Forestry, and Fisheries”:

• USA: Focus on health/functional tea products.
• EU: Focus on safety and health image.
• Asia: Focus on popular categories like matcha.

It took nearly a decade to reach the export goal of 15 billion JPY. Matcha is the undeniable star: while occupying only 3–4% of total production volume, it contributes 14% of the total tea output value.

• Growth: From 2022 to 2023, matcha export value jumped from 14.7 billion JPY to 21.6 billion JPY.
• Unit Price: Rose from approx. 176 RMB/kg in 2019 to 235.4 RMB/kg in 2023.
• Top Market: The US is the largest market, where 75% of imported Japanese tea is powdered green tea.

2. Decoupling of Brand and Origin Facing soaring local material costs, limited capacity, abnormal weather, and insufficient facilities, Japanese beverage giants like Ito En are looking overseas. They are exploring localized procurement in Asia and Africa, negotiating with local processors to produce “Japan Standard” matcha products using overseas raw materials to control costs.

This trend is significant. The international trade of matcha is moving from a unidirectional “Made in Japan” output to a new stage where brand and origin are deeply separated. Japanese brands may use global raw materials to maintain their market position, while green tea producing countries like China are accelerating their own branding to penetrate the high-end market in reverse.