Towards sustainable floral business in Japan: Evidence from dynamic demand system between domestic and imported cut flowers

Japan has been addressed the largest market for cut flower imports and consumption in Asia. Since 2000, the floral industry in Japan has faced a decline in production due to an aging workforce and rising costs, while domestic demand for cut flowers has remained stable. The supply-demand gap has been boosted by increasing imports. The import and household consumption survey data from January 2002 to December 2021 and dynamic EC-AIDS model are employed to estimate the expenditure, own-price compensated, and cross-price elasticities between domestic and imported cut flowers in Japan. Our findings show that domestic floral business promotion policy enacted since 2014 had no significant impacts on structural change of demand between imported and domestic cut flowers. The empirical results indicate that domestic cut flowers in Japan are substitutes for those from major import source countries, though the degree of substitutions are limited. Notably, not only the complementary relationship of orchids but also an expenditure elasticity with 2.62 of Chrysanthemum between Japan and Taiwan, suggesting a greater sustainable potential in the Japanese Market.