The world's largest corn importer has long had animal feed that uses genetically modified organisms, or GMO, but buys only a small amount of such corn for human food use.
But food makers are caught between U.S. farmers demanding a higher premium for GMO-free corn and Japanese grocers and consumers, who are the last in Asia still resisting modified crops.
The rising costs and difficulty of dealing with modified corn separately from unmodified could also see more tie-ups in the industry, after Oji Cornstarch last year formed an alliance with two smaller rivals.
"We've started to ask each of our customers in an interview whether and how much they can take," said Yoshihiko Shikakura, senior managing director at the sales department of Oji Cornstarch, a joint venture between Oji Paper and the trading company Mitsui.
Until recently, most corn processors have used only non-GMO crops to produce corn starch and corn syrup, a widely used sweetener, as some customers, mainly beer and drug makers, refuse to use GMOs.
But smaller corn processors have already used unseparated cargoes, taking advantage of lax labelling laws for small quantities of raw materials in foods in Japan.
Shrinking supplies could mean the price premium on non-GMO corn that processors pay to importers is set to double to ¥10,000, or $100, a ton next year, analysts predict.
Currently, U.S. GMO corn is imported at around ¥40,000 a ton, doubling over the past two years on a similar rally in Chicago corn prices during the same period.
GMO supporters argue that soft drink makers are the most likely to make the switch as the process to turn corn starch into syrup makes protein content in the product negligible.
Beer makers so far are resisting price hikes in corn starch, an important ingredient for beer, or a shift to GMO.
"Lack of public acceptance means we don't consider it," said a spokesman at Kirin Holdings, which seven years ago led its peers to use only non-GMO corn starch for Japanese beer.
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A survey last July by the Japanese Food Safety Commission showed that only 4.1 percent of consumers think GMO food is free from risk.
Use of GMO products would trigger negative campaigning by anti-GMO groups such as Greenpeace, which led a successful attack on GMO foods in Europe.
"It is not something we can overlook due to a lack of strict labeling rules here," said Sachiyo Tanahashi, a GMO campaigner at Greenpeace Japan. "We've been proposing top food makers produce organic products at a premium price to gauge the appetite of consumers, but so far in vain."
Japan grows very little corn of its own and imports 12 million tons a year for animal feed - mostly GMO crops except for about 700,000 tons of non-GMO for organic eggs and other quality products.
It also imports about three million tons of corn a year for use in foodstuffs, almost all of which is non-GMO from the United States, the world's biggest corn exporter.
In 2007, GMO crops were found on 73 percent of U.S. corn acres and were expected to rise further, increasing the costs to separate non-GMO from GMO crops in planting, storing and transporting.
Use of GMO could be costly for corn processors. If an unapproved GMO trait is found, importers, not exporters, are responsible to pay the extra cost to dispose of the unwanted material.
Two new alliances in Japan by top corn processors will make it easier to introduce GMO corn, as their enlarged businesses can allocate complete plants to handle GMO supplies separately, a logic that could lead to further tie-ups in the food processing industry.
In the face of rising costs, Oji Cornstarch last year formed an alliance with Gun-ei Chemical Industry and another smaller rival.
If customers decide to accept GMO supplies, the bigger group means they now have the flexibility to allocate one factory to use GMO corn.
Another group is also forming. Nihon Shokuhin Kako announced an alliance with Kato Kagaku in January, bringing together two of the top three processors, while a grouping of smaller processors is also possible.
"The more the non-GMO premium rises, the more business alignment is formed here," said Shikakura of Oji Cornstarch.
© 2008 Reuters