Pharmaceutical laws prevent the use of synthetic ingredients and nutrients in dietary supplements, so innovation in the sector is, by necessity, focused on plants and natural ingredients.
While the US is ahead in synthetic ingredient innovations, in Japan efforts are underway to find health uses for such diverse natural products as onions, oysters, vinegar and egg yolk.
However natural products form only a small part of the picture when it comes to Japanese innovation - as anyone with even a passing interest in cutting edge technology will be aware.
"Japan has to innovate to come to the global market for any industry," said Yamaguchi. "We cannot compete with China over low cost manufacturing, or with other developed countries in other ways. So we have to innovate in new areas to survive in the local market. Health is part of this."
Technology innovations tend to trickle down to the US and European markets - at least the ones that prove their worth. And Yamaguchi said he is seeing signs of the same thing happening in functional foods.
One example is Econa, a healthy cooking oil from Kao with a molecular make-up that means it is not stored in the body, but passes straight through. Intended to lower blood triglyceride levels, this product is expected to start being marketed in the US soon.
On the ingredient side, Paul drew attention on one particularly innovative offering from Kao: a healthy oil that is not stored as fat in the body. Known as Econa, it passes straight through the body as it has only two chains of molecular fat. He said it will start to be marketed in the US pretty soon, through MDM.
What is more, some Japanese companies are said to be looking towards the US market with a view to acquiring companies there.
And Japanese CoQ10 supplier Kaneka is in the process of establishing a production plant on US soil, which should be completed this year.
Despite occupying a position towards the fore of the world nutrition market, there are certain issues that are holding it back on the domestic front.
The regulation governing FOSHU (foods for specified health uses) was updated in February 2005 with the aim of increasing the number of approved products on the market.
Yamaguchi told NutraIngredients.com that the Japanese nutrition market is valued in the region of US$27 billion, but FOSHU foods account for only $6 billion of this. Non-FOSHU functional foods account for $11 billion, and dietary supplements around $11 billion too.
There are over 500 products approved as FOSHU, but less than 10 per cent of these are truly innovative. The rest, he said, are "me too" products.
In fact, there are many more innovative ingredients that are outside the FOSHU regulation. This is because of the high cost of FOSHU approval, which can amount to as much as US$1 million.
"Smaller companies cannot afford to do it, so they don't bother. FOSHU approval is not a guarantee of sales," said Yamaguchi.
Indeed he takes a pragmatic view of the market: FOSHU or no FOSHU, products will sell if they are good, and will not sell if they are no good.
The 2005 update to the FOSHU regulation created three new categories of products: qualified, standardized and disease risk reduction. But in fact, the need for human clinical trials has held back the granting of new claims.
Moreover, dietary supplements are not recognized. "There are drugs and foods, nothing in between. If the government lifts restrictions and recognize the supplement industry, then the Japanese nutrition industry will thrive."
Paul Yamaguchi & Associates' new Functional Foods Japan2006, Product Report has just been published.
Japan's hot ingredients of the moment, according to Paul Yamaguchi:
· Alpha lipoic acid (ALA)· CoQ10· Collagen· Ceramide· Pracenta· Hyaluronic acid· Isoflavones· Amino acids, eg carnitine· Essential fatty oils (EPA, DHA, DPA)· "Anything that satisfies women aged 45 and over. These are prime customers for nutritional supplements as they have both time and money and they want to be healthy forever."
The next line of emerging ingredients:
· Tocotorienol (super vitamin C);· Astaxanthin;· Peptide (soy, oligo, fish and others);· Creatine.
Innovative FOSHU products:
· Colesteblock from Kyowa (to lower cholesterol, using phospholipids and soy peptide);· Ameal S from Calpis (for high blood pressure, using lactotori peptide);· Minds from Mizukan (for high blood pressure, using apple vinegar)· Bansho-reicha from Yakult (for high glucose, using guava pholphenols);· Econa Cooking oil from Kao (for serum triglyceride levels, using diacylglycoerol).
Innovative products outside of FOSHU:
· Green tea drink from Kirin (or seasonal allergy, using KW bacteria);· Soy peptide soymilk from Kibun (energy boost using soy peptide);· Plant lactic acid bacteria drink from Kagome (for gastrointestinal health using plant lactic acid bacteria, which is stronger than milk-based bacteria);· Pucera from Oilio (meal replacement cookies that ease PMS, using linolenic acid).