Matcha mania strains Japan

0:02Good morning from the Financial Times. Today is Friday, October 17th, and this is your FT News briefing. Investors got the jitters over U.S. regional banks, and the United Kingdom's lackluster GDP is putting more pressure on the government. Plus, people are going nuts for matcha, and it's putting a big strain on Japan. T-Ceramie Grandmasters can't afford to buy matcha, and instead people in Los Angeles or London are mixing matcha with sugar and milk, not appreciating the fine art that is matchup. I'm Mark Filippino, and here's the news you need to start your day.

0:49U.S. regional bank shares took a tumble yesterday. Two lenders, Western Alliance Bank and Zions Bank, said they were exposed to alleged fraud by borrowers. There were already wider concerns about the health of bank loan portfolios, the recent failures by the car parts maker First brands and the auto lender Tricolor has hurt credit investors. And it's made people worried that there could be more cracks in the private credit market. So how bad was it for regional lenders? Well, yesterday, the KBW regional banking index fell around 6%.

1:27The UK economy grew just a tenth of a percent in August. It was in line with what economists expected, but the lackluster number puts Chancellor Rachel Reeves in a tough spot. She's set to deliver her budget next month. Here to tell us more is the FT's George Parker. Hi, George. Hi there. All right, so first off, just give us some more details on yesterday's GDP reading and how the economy is just, you know, doing in general. Yeah, I mean, the British economy is pretty much in the pack of the G7 economies at the moment. One of the things you often hear Sir Keir Starmer, the UK prime minister, saying is that the British economy grew faster than any other G7 economy in the first half of the year.

2:06So things are not altogether disastrous. But as Rachel Reeves, the UK Chancellor, likes to say, the UK economy feels stuck. And that's confirmed by the data we saw yesterday from the Office of National Statistics. That showed that the UK economy grew by 0.1 % in August, so a pretty lackluster figure. And that compared with a 0.1 % fall in July. So the economy at the moment is sort of flatlining at the moment, but still a sort of sense that the British economy will limp along at a decent rate for the whole of 2025. Do we have a sense of why growth is so low? Well, I mean, these are the issues that are hanging over Rachel Reeves, the Chancellor, ahead of her budget on November the 26th.

2:48So years of underinvestment in Britain's infrastructure, underinvestment by businesses in capital as well, as seen as a problem, a lack of British savings going into the stock market. So a whole load of things that she's trying to fix. And in addition to that, businesses will point out that there are other factors, some of which are Rachel Reeves' own problem. For example, increasing by£25 billion the tax on employers when they bring on a member of staff. Donald Trump's trade wars is another factor as well. And of course, we have a national minimum wage here, which the government agreed to increase significantly earlier in the year.

3:24All of these things have added to business costs and made things even harder for her ahead of the budget. Yeah, let's talk a little bit about the budget. What can we expect from Reeves between now and then? Well, the budget is meant to be an autumn budget, and it's been pushed back as far as you can possibly do so in the meteorological definition of the autumn. And that's intended to give her time to basically prepare the ground for higher taxation, which is inevitable, I think, in this budget. Some people speculating that taxes could go up by another 20, 25 billion pounds potentially, but also intended to give her more time to roll out things intended to prove to sceptical observers that she actually has a plan to boost that sluggish growth rate.

4:03So we're starting to see things like reforming the UK planning system in quite an aggressive way. One of the frequent complaints of international investors, particularly American investors in Britain, is that things are being held up by our planning system. And we're expecting her to announce details of a new railway line. And also, we're going to hear a bit more about efforts to improve skills training. There's a massive problem in the UK at the moment of people being economically inactive. And so a big drive by the government to get those people out of the benefit system and back into work. So all these things are going to be rolled out over the next few weeks to try to give a compelling growth narrative ahead of what will inevitably be a really tough budget.

4:44Yeah. How are people going to deal with this tax rise plan that she's expected to announce? Well, probably badly because the Labour Party gave the impression ahead of the July 24 general election in the UK that taxes wouldn't have to rise to pay for any of their plans. They came into power. They did what all governments do. They opened the books and, oh my goodness, things are worse than we thought. And they jacked up taxes by 40 billion pounds, you know, one of the biggest tax-raising budgets on record. Rachel Reeves gave the impression that it was what she called a one-and-done budget, that she wouldn't have to do anything like that for the rest of the parliament.

5:20And here we are now 12 months later. So these are things which will go down very badly with the British public. There's only so much more money you can get out of wealthy people. These taxes will impact on business and they'll impact on ordinary voters as well. So it's going to be a tough sell. That's the FT's political editor, George Parker in London. Thanks, George. Thanks, Mark.

5:45Japan is experiencing something called matcha mania. There is an enormous demand around the world for this umami-flavored green powder that's made from tea leaves, so much so that the country is having a hard time keeping up with the hype. The FT's Tokyo correspondent, Harry Dempsey, went out to meet these matcha superfans. Hey, Harry. Hey. Okay, so tell me a little bit about the people that you ran into while reporting on matcha, which, by the way, sounds very cool. So the consumer interest in matcha has gone crazy. Tourists are coming to Japan, hunting high and low for matcha. People will travel to Uji, which is in Kyoto, renowned for some of the highest grade matcha, and they will queue up for hours outside there.

6:29I met a Japanese farmer in Shizuoka, and he had even had people turn up to his tiny farm in the mountains asking him for matcha. And he's been sort of flooded with emails of people wanting to get hold of matcha. Wow. And just, you know, lay it out there for me. What's the big deal? Why has matcha gotten so popular that I see it everywhere? I think it's part of a global sort of health trend. Matcha has some health benefits if consumed in moderation. It's also got a very social media friendly side to it. It's this beautiful bright green color and there's the matcha talk hashtag. So the popularity of it, I think, has spiraled from there.

7:12Not going to lie, Harry, this sounds like a good thing for Japan's matcha business. Why has the hyper popularity become a problem? I think you're right. Let's not get this wrong. This is great news for Japan's matcha industry. The farmers who are making the tea leaves that are used to make matcha, They use the same plants to create the leaves for green tea, which has been having big issues for the last decade or so. But there is a flip side of the world has gone so matcha mad that they really can't keep up with supply. And what that has done is that has really squeezed both markets of both matcha and green tea.

7:54and that has caused a lot of upset domestically because these are two sort of products that are part of Japanese culture, but they've become really, really expensive. So that's really going to cause some pain at home for consumers. What are those producers in Japan doing to try to keep up with this demand? Can they actually do anything about it? So they're doing a couple of things. If you are trying to create a new field from scratch, that can take at least five years. But what they can do as a quick fix is convert fields that are used for green tea to instead produce matchup. But as I just said, that's created a squeeze in two markets.

8:35The other thing they are trying to do is Japan has a big, big problem across its agricultural industry of aging farmers. So the average age of a farmer in Japan is 69 years old. And so one of the responses of the industry is to try and consolidate the fields into larger plots of land, which hopefully should pave the way for more mechanization and modernization of the farming practices. What do you think happens if Japan can't keep up with this matcha demand? Because it sounds overwhelming. Well, I think Japan, everybody in Japan admits that it won't be able to keep up because of the structural problems it faces with an aging population that is particularly acute in a primary sector like farming, where it's going to be very hard to convince young people to get into farming and immigration is becoming harder in Japan because of right wing politics.

9:32In that circumstance, there are countries with far more land availability and a cheap pool of available labor. And the number one candidate here is China, who can produce that matcha. And China is already a huge producer of green tea. It produces green tea on a quantum of Japan. And so I think China is definitely making an aggressive push to try and jump on the bandwagon. So I suppose there's a little bit of a game going on here and we'll see how that plays out. Harry Dempsey is the FT's Tokyo correspondent. Thanks, Harry. Thank you. You can read more on all these stories for free when you click the links in our show notes.

10:16This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Lucy Baldwin, Sonia Hudson, Josh Gabbard-Doyon, Fiona Simon, Ethan Plotkin, Michaela Tendera, and me, Mark Filipino. Our show is mixed by Alex Higgins, Kent Millitzer, and Kelly Gary. We had help this week from Peter Barber, Michael Lello, and Gavin Kallman. Our acting co-head of audio is Topher Forges, and our theme song is by Metaphor Music.

10:51Thank you.