Following a government easing in April 1990 of import quotas of preparations containing sugar, many food companies have switched to using prepared blends of ingredients as they are more economic and simplify the process to make products, industry experts said.

"The usage of prepared blends of cocoa powder and sugar has increased particularly after the government eased import quotas," said Takatomo Eto, spokesman at major confectionery-maker Meiji Seika Kaisha Ltd.

Statistics compiled by the Finance Ministry showed imports of edible preparations containing sugar surged to 125,000 tonnes in 1997 compared with just 2,000 tonnesin 1990.

Between January and July 1998, Japanese imports of edible preparations with sugar rose 3.0 percent year-on-year to 73,000 tonnes, the ministry said. Raw sugar imports during the same period fell 8.4 percent to 805,998 tonnes from a year earlier, it said.

Overall demand for sugar was also expected shrink in Japan as the population was becoming more health conscious, industry experts said. In the physical market, traders said purchases for September/October were almost completed.

"We haven't seen many purchases for March/May yet, so we're looking out for the timing of when Asian countries will start buying. Purchases will also depend on how inexpensive Latin American sugar gets," the trader said. Low priced sugar from countries such as Brazil and Guatemala have been putting pressure on Thai premiums, traders said.

September premiums for Thai raw sugar were quoted at 80/110 points per lb over Coffee, Sugar and Cocoa Exchange (CSCE) prices, compared with 115 points earlier this week.

Tradersexpected March/May premium levels to remain soft at around 35/45 points against 40/50 points earlier in the week.