East Asia takes an important place in Japanese food industry investment in the world. Previous studies reported the agglomeration effects as well as the influence of market potential on location analysis. However, traditional market potential fails to explain the demand driven by export to nearby countries in the same region because it only takes the local or domestic market into consideration. In this paper, we extend Krugman's research [11] to include analysis of the location of competitors for adjusting the market potential based on the new economic geography (NEG). We also exam the Krugman market potential with data of bilateral trade from 1989 to 2003 by the methods for evaluating the Krugman market potential from the trade equation introduced by Head and Mayer [9]. Afterwards, we begin with a logit estimation of country choice for Japanese food firms in East Asia, and attempt to analyze the determinants of the location choice by Japanese food industries. As a result, we found demand does matter for location choice and even plays a more important role than agglomeration effects, which have been the primary emphasis of past work on location choice.