As the summer heats up, the beer is flowing around backyard barbecue grills and rooftop beer gardens in city centers. And this year, a recovering economy is putting a little extra fizz into beer sales.

“I love beer,” declared Akihiro Seki, a 39-year-old insurance accountant, downing his fifth icy glass in the muggy open air of a beer garden. “We know the economy’s getting better, so we feel more confident spending a little extra.”

Beer shipments are on the rise for the first time in a decade as the world’s second-largest economy toasts a recovery that is gathering pace after years in the doldrums. But the long-term future of Japan’s 2.85 trillion yen beer industry is anything but bubbly.

Changing tastes, healthier lifestyles and a shrinking population are looming threats to an industry that has already undergone painful restructuring over the last decade.

As they struggle to keep their profits up, the big brewers — Kirin Brewery Co., Asahi Breweries Ltd., Sapporo Breweries Ltd. and Suntory Ltd. — are trying everything from diversifying into baby food, to expanding into China, to introducing soybean beer.

So far, they’ve had mixed results.

“Until now, the beer market has been shrinking because people wanted cheaper drinks,” said Shuji Takimoto, a spokesman for the Brewers Association of Japan. “But just judging by the changing population, the future of beer also looks tough.”

The good news is that in the first half of 2006, domestic shipments of beer rose 0.3 percent from the previous year, their first increase in a decade, as rising wages and consumer optimism encouraged people to dine out. Shipments of all beer products, including low-malt and “third category” beerlike drinks, climbed 1.1 percent to 230.66 million cases, their first increase in five years.

Beer has a relatively short history in Japan, with the first brewery opening in 1872. But Japanese took to beer drinking with gusto. By 2004, it was the world’s sixth-largest beer-drinking nation, guzzling 6.55 million kiloliters a year. On a per capita basis, Japan is the top beer consumer in Asia, with each Japanese downing an average of 51.3 liters per year, or one 350 ml can every 2 1/2 days.

But beer demand is under attack on several fronts: Wine and spirits are winning over more drinkers, while health concerns are dampening overall alcohol consumption.

Meanwhile, the declining population and growing ranks of elderly — at 21 percent, it has the world’s highest share of people aged 65 and over — mean a future with fewer beer drinkers.

To bolster sales during the economic slump, brewers developed new products to get around the so-called “taste tax” that accounts for nearly half the price of a can of regular beer.

The tax applies only to beers containing more than 67 percent malt. So brewers rolled out low-malt drinks, which substitute rice or corn syrup for malt, and even no-malt varieties made of soybeans.

At half the price of all-malt beers, they quickly won over penny-pinching drinkers for whom any brew would do. The problem is that profit margins are razor thin, and purists shun them.

“The difference in taste is obvious,” said Yukiko Oshima, a beer analyst with Credit Suisse First Boston in Tokyo.

Kirin, which just wrested the title of Japan’s top beer seller back from arch rival Asahi, has branched out into pharmaceuticals and seedlings for cut flowers in search of new revenues. Asahi, which gets 90 percent of its sales from alcohol, launched a similar diversification strategy in April, buying baby formula maker Wakodo Co.

Although Japan’s beer market looks to be on the decline, a savior may be waiting in the wings: China. Already the world’s largest beer consumer, China is also its fastest growing beer market, expanding by around 10 percent in 2004. Japanese brewers are ramping up production in China as fast as they can to catch some of that growth.

Leading the way was Suntory, which began brewing beer in China in 1984. In June, it bought the Chinese operations of Australia’s Foster’s Group Ltd. and now controls about 60 percent of the booming Shanghai beer market.

Asahi is setting up its fifth joint-venture brewery in the country. And Kirin plans to build a new brewery in Guangdong Province and buy out its local partner.

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