Pharmaceuticals Market Size
Units: US$ millions

Data Sources

Market Size (Local Shipment Value): Annual Pharmaceutical Production Statistics, Ministry of Health, Labour and Welfare (“MHLW”) Total Export and Imports: Trade Statistics of Japan, Ministry of Finance (“MOF”)

• * Estimated by Business Monitor International (“BMI”) 

• ** Estimated by U.S. Commercial Service Japan (“CS Japan”)
   

Japan’s pharmaceutical market is the third largest in the world, following the United States and China and a critical market for U.S. pharmaceutical companies. According the Ministry of Health, Labour and Welfare (MHLW)’s Annual Pharmaceutical Production Statistics, the Japanese market for prescription and nonprescription pharmaceuticals (in terms of shipment value) in 2023 totaled Yen 12.4 trillion (US$ 88 billion at Yen 140.7/$1). Approximately 93 percent of the market consisted of prescription pharmaceuticals. The market for prescription drugs surpassed Yen 11 trillion for the first time in 2022, and it is estimated to exceed Yen 12 trillion yen in 2029 with a five-year compound annual growth rate (CAGR) of 0.9-1.9% according to IQVIA, a leading global research organization. IQVIA also projected that the patented drug market will experience steady growth with a five-year CAGR of 2.9%, positioning Japan as the second largest market for patented drugs through 2029.

All major U.S. pharmaceutical companies have subsidiaries in Japan, where the United States consistently enjoys a trade surplus against Japan. According to the latest official figures from the Ministry of Finance (MOF)’s Trade Statistics of Japan, the United States had a trade surplus of Yen 456 billion ($3 billion at Yen 151.5/US$ 1) in 2024. U.S. companies captured approximately 26% market share for prescription pharmaceuticals based on sales among the top 20 products in Japan in 2023. The market share of U.S. pharmaceuticals is estimated to be higher if local production and U.S.-owned compounds licensed to Japanese manufacturers are included.   

With Japan’s aging population, the demand for pharmaceuticals, especially chronic disease and innovative pharmaceuticals, is steadily increasing, leading to support market growth and the opportunities for U.S. pharmaceuticals.

Japan’s Healthcare Policy

Japan’s healthcare system receives high marks for providing both basic care and a free choice of doctors to all Japanese citizens at an affordable cost under the country’s national health insurance system established in 1961. Japan enjoys one of the world’s highest life expectancy rates along with the low rate of infant mortality. 

Nonetheless, Japan’s aging population combined with a low national birthrate has led to serious financial challenges for Japan’s medical system.  In response to these challenges, the Government of Japan (GOJ) has taken various measures to cut national healthcare spending. U.S. companies have expressed serious concerns that frequent changes to the Japanese healthcare pricing and reimbursement systems have made Japan an unpredictable healthcare market. Specifically with regards to pharmaceuticals, Japan’s transition in Fiscal Year 2021 from a biennial reimbursement price revision to an annual price revision further increased the unpredictability of drug prices, which resulted lags and losses of key drugs in Japan. According to IQVIA, out of the 380 new drugs (with new active ingredients) approved in the United States between 2014 and 2022, 185 or 49% had not been approved in Japan. Furthermore, the proportion of new drugs that were not approved in Japan within two years of U.S. approval averaged 59% annuall

Under these circumstances, the GOJ has been taking various regulatory measures to address drug lags and losses. For example, in 2025, the GOJ revised the Pharmaceutical and Medical Device Act. (PMD Act.) to expand the scope of the conditional approval scheme as well as to provides an incentive of incentive of extending the maximum reexamination period (data protection period) of orphan drugs, rare conditions that affect a small number of people. The regulatory environment is expected to further improve. However, contrary to the positive developments on the regulatory approval side, pricing remains a challenge due to strong fiscal pressures by the GOJ to contain healthcare expenditures that continue to increase as a result of Japan’s rapidly aging population.   

Leading Sub-sectors 

Biopharmaceuticals

The pharmaceutical market is undergoing a significant global shift from small-molecule compounds to biopharmaceuticals. In Japan as well, biopharmaceuticals are expected to drive the domestic market in the future. According to the Cabinet Office, the domestic market size for biopharmaceuticals and regenerative medicine-related industries was approximately Yen 1.5 trillion as of 2020, with a target to expand it to over Yen 3.3 trillion by 2030. The Government of Japan (GOJ) is actively working to expand the bio-related market. However, around 90% of antibody drugs—one category of biopharmaceuticals sold in Japan—are manufactured overseas, and the market is expected to remain highly dependent on foreign production bases, including those in the United States, moving forward.

Genomic Medicines

Genomic medicine and personalized treatment are gaining attention as powerful tools for providing optimal care tailored to each individual patient. In Japan, the number of approved molecular targeted therapies for cancer was around 20 in 2010, but by 2022, it had exceeded 100, highlighting the growing importance of genomic medicine. In line with this trend, the market for genomic testing in cancer care is also expected to expand. According to research firm Fuji Keizai, comprehensive genomic profiling (CGP) tests in cancer care are projected to grow from approximately 9.5 billion yen in 2023 to 54 billion yen by 2035. Furthermore, when including other related tests such as monitoring for resistance prediction, minimal residual disease (MRD) testing for post-surgical recurrence and prognosis prediction, multi cancer early detection test (MCET), and companion diagnostics, the market for these key categories of genomic testing in cancer care is expected to grow more than fivefold from 2023 onward.

Artificial Intelligence Drug Discovery 

With the introduction of AI technology, the drug development process, which traditionally requires long review periods and high costs, is becoming more efficient. MHLW’s Council for Promoting AI Utilization in the Healthcare Field has selected drug development as one of the six priority areas for AI development in Japan. One GOJ priority for AI drug development is building a knowledge database for searching drug discovery targets; another GOJ priority is matching AI support between pharmaceutical companies and IT companies. AI is already being put to practical use in certain stages of the drug discovery process, and with the GOJ actively supporting AI pharmaceutical development, it is expected that AI will be integrated into even more stages of the drug discovery process.

Opportunities 

Despite the challenging pricing environment, Japan continues to be an important market for innovative U.S. pharmaceutical companies. Japan’s aging drives demand for innovative treatments, personalized therapies, and AI-driven drug discovery. In addition, the Japanese pharmaceutical market is supported by the following factors that underpin market opportunities:

• High healthcare expenditure: Japan spends about 10% of its GDP on healthcare, one of the highest levels among OECD countries. The government’s medical expense subsidies and insurance systems provide an environment where patients can easily access advanced medical care.
   
• Stable regulatory environment: Japan’s pharmaceutical regulations are aligned with global standards, with a strong emphasis on quality, safety, and efficacy. In recent years, the approval process has been expedited, making it easier to bring innovative products to the market.
   
• Government support and policies: The Japanese government recognizes the pharmaceutical industry as an important sector and has introduced regulatory easing and support measures, particularly in the areas of biopharmaceuticals and regenerative medicine. This facilitates the development of new treatments and technologies by companies.
• Research capability: There are numerous research institutions, universities, and pharmaceutical companies, actively engaged in R&D.
   
• Legal framework: Japan has a strong legal framework to protect intellectual property (IP).
   
• Time to access: New drug prices are determined within 60-90 days after regulatory approval. 
   
• Price maintenance: The Price Maintenance Premium (PMP) rule maintains the prices of on-patent drugs during the patent period under certain conditions.

Resources 

Government of Japan Agencies 

• Ministry of Health, Labor and Welfare (“MHLW”)
• Pharmaceutical and Medical Devices Agency (“PMDA”)

Pharmaceutical Organizations 

• The Japan Pharmaceutical Manufacturers Association (“JPMA”)
• Japan Bioindustry Association (“JBA”)
• Japan Generic Medicines Association (“JGA”)
• Pharmaceutical Research and Manufacturers of America (“PhRMA”)

Annual Trade Events 

• Medical Japan 
  Spring (Osaka) / Fall (Tokyo)

• CPhI Japan 
  April (Tokyo)

• MEDTEC Japan 
  April (Tokyo)

• International Technical Exhibition of Medical Imaging (ITEM) 
  April (Yokohama)

• INTERPHEX Week JAPAN 
  June (Tokyo)

• Bio Japan 
  October (Yokohama)

Commercial Service Japan  

For additional information about Japan’s pharmaceutical business sector, please contact Commercial Service Japan (“CS Japan”) at Office.Tokyo@trade.gov, Mr. Hiroyuki Hanawa at Hiroyuki.Hanawa@trade.gov