Tag: Japan

BAT Calls for Higher Cigarette Taxes in Japan

Photo: Colleen Williams
British American Tobacco has surprised some observers by calling for higher cigarette taxes in Japan, reports the Japan Times.
The company has submitted the request in writing to a group of lawmakers ahead of a tax system reform scheduled for 2022.
The unusual move by a tobacco-maker comes as Japan is slated to raise its tobacco tax only for heat-not-burn (HnB) tobacco products in October 2022, which is expected to make some of such products more expensive than cigarettes.
BAT is concerned that this will discourage smokers from switching to HnB products, which the company believes are less harmful to health than combustible cigarettes.
The company is also requesting that the tax on heat-not-burn tobacco be increased at a slower pace than that for cigarettes in the medium to long run.
In 2018, the government decided to increase the cigarette tax by ¥1 per cigarette each in 2018, 2020 and 2021 and the tax on heat-not-burn products in five stages from 2018 to 2022.
According to the Tobacco Institute of Japan (TIOJ), sales of cigarettes in fiscal 2020, which ended last March, dropped 11.8 percent from the previous year to ¥2.47 trillion, due in part to a fall in opportunities to smoke outside home as people stayed at home amid the coronavirus pandemic.
Tobacco harm reduction activists attribute the sharp drop in smoking to the rising popularity of HnB products.
The TIOJ’s first survey of HnB products showed sales of ¥1.06 trillion, or more than 40 percent of the country’s cigarette sales.
November 5, 2021
JT to Raise Prices of Heating Products

Photo: JT
Japan Tobacco has received approval from the Ministry of Finance for its application dated Aug. 23, 2021, to amend retail prices of its heated-tobacco products in Japan in conjunction with the revised tax structure.
The new retail prices will be effective on Oct. 1, 2021, for a total of 50 heated-tobacco products. As a result of the changes, the price of Mevius for Ploom Tech will increase to ¥570 ($5.18) from ¥540, and the price of Mevius for Ploom Tech+ will increase to ¥580 from ¥550. Mevius for Ploom X and Ploom S will increase by ¥30 to ¥570.
In a statement, JT said it will strive to continue to improve the quality of its products and services, and to exceed the expectations of its consumers.
The retail price amendments are already included in the 2021 consolidated forecast announced on July 30, 2021.
August 27, 2021
Japan Council Slashes Leaf Cultivation

Photo: Tobacco Reporter archive
The Leaf Tobacco Deliberative Council, chaired by Yoshitsugu Minagawa, decided to reduce the total tobacco cultivation area based on a survey of each Japanese leaf tobacco growers’ willingness to cultivate for the 2022 leaf tobacco sales contract. The decision was based on the council’s approval of a proposal submitted by Japan Tobacco.
In the Japanese domestic tobacco business, the total demand has continued to decline in recent years due to structural factors, such as the fall in adult population and the aging of society as well as tighter smoking-related regulations. In addition, there have been rapid changes in the market over the past few years, such as the expansion and intensifying competition of the heated-tobacco and the value segment cigarette categories.
JT’s sales volume has continued to decline following the decline of total demand, despite efforts to strengthen the company’s top line through the growth of its heated-tobacco category and increasing the share of cigarettes.
In light of these circumstances, JT made the proposal to reduce the total tobacco cultivation area with the aim to secure a balance of supply and demand over the mid-term and long-term and to rebuild a stable and sustainable structure to produce and procure domestic leaf tobacco.
Specifically, JT will ask each Japanese leaf tobacco grower if they would like to cease tobacco cultivation. JT will summarize each grower’s intent on next year’s tobacco cultivation upon consultation and in cooperation with the growers’ unions. Based on the survey results, JT will then submit its proposal on tobacco cultivation areas and leaf prices for 2022 to the next Leaf Tobacco Deliberative Council scheduled for autumn.
July 29, 2021
Heating Up

Photo: JT
Massive growth in Japan’s tobacco heating products market has helped push cigarette sales to historic lows.
By Timothy S. Donahue
Japan is the world’s largest market for heated-tobacco products (HTPs). Brands like Philip Morris International’s IQOS, Japan Tobacco’s Ploom and BAT’s Glo have garnered a significant share at the expense of their combustible counterparts.
In the first quarter of 2021, domestic cigarette sales in Japan totaled about 25 billion sticks. In 2016, during the same period, Japanese smokers bought 43.6 billion cigarettes. Over the past five years, cigarette sales have declined nearly 43 percent, according to Euromonitor International.
Since the introduction of IQOS in Japan in 2014 as part of a trial, the annual cigarette volume decline has accelerated beyond its historical trend of 3 percent to 4 percent. Last year, sales dropped 4.2 percent; in the first quarter of 2021, they fell by another 6.5 percent in the first quarter, according to Pieter Vorster, managing director at Idwala Research. HTPs have continued to grow and held a 30 percent share of the total market in the first quarter of 2021, he said. This is up from 26 percent in 2020 overall and 28 percent in the fourth quarter of 2020.
In an interview with Nikkei, Japan’s economic newspaper, Jacek Olczak, who took over as PMI’s CEO on May 5, predicted that Japan will become a smoke-free society within 10 years. PMI expects to gradually pull out of combustible tobacco products globally in the next 10 years to 15 years, and Olczak said he wants the transition to happen first in Japan.
Following its successful trial in 2014, PMI began selling its IQOS device nationwide in Japan in 2016. The company held a 70 percent share of Japan’s market for HTPs in 2019, according to Euromonitor International, while JT held 10 percent and BAT held 20 percent. In June, BAT stated that its reduced-risk products had gained share in all key markets, including the United States and Japan, with the company adding 1.4 million new customers in the first quarter.

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The Japanese reduced-risk tobacco product market is unique in that nicotine vaping products are banned whereas HTPs have been embraced, according to Vorster. Consumers who take up HTPs also tend to switch completely from combustibles faster than they do with e-cigarettes, where prolonged dual use is not uncommon.
“The net result of this is the direct substitution effect that we have seen in Japan since 2017, when IQOS first started making headway in the market. For Japan Tobacco, it has been problematic because, as the largest cigarette producer, it has lost the most volume to HTP,” said Vorster.
Japan’s Pharmaceutical Affairs Law classifies nicotine-containing liquids as drugs and liquid-inhaling devices that contain nicotine as medical devices, according to Dinesh Babu Thotakura, general manager of JT’s Media & Investor Relations Division. “Therefore, vaping products sold in Japan are nicotine-free. Currently, we do not have plans to launch vaping products in Japan.”
Nicotine-containing e-cigarettes are regulated by the Japanese Ministry of Health Labor and Welfare, according to Vorster. “Private importation is allowed, provided it is for personal use only and amounts to less than one month’s supply,” he said. “HTP, on the other hand, is classified as a tobacco product and therefore regulated by the Ministry of Finance.”
While part of the success of HTPs is due to Japan’s ban on e-cigarette sales, the country’s comparatively accommodative regulatory framework has made an impact as well, according to Thotakura. Last year, when Japan restricted smoking in restaurants, it made an exception for HTPs, which can be consumed in bars and restaurants if certain conditions, such as having ventilation equipment in place, are met.
“The Japanese [combustible cigarette] market had been declining historically even before the introduction of HTPs; however, the introduction of HTPs has accelerated that decline,” said Thotakura. “Although we are aware that the number of cigarette smokers in Japan is on a downward trend due to a combination of factors, including tighter regulations, aging population and increased health awareness, our Ploom series of HTPs are gaining popularity among consumers who are especially conscious of their surrounding environment.”
When asked if there is room in Japan for another HTP product besides the Big Three, Vorster said it is hard to see the status quo changing meaningfully. “For either BAT or JT or a new entrant to make meaningful inroads, they would need to offer a product that provides consumers with a superior sensorial and nicotine-delivery experience compared to IQOS,” he said. “A product that can deliver an experience closer to a cigarette stands to gain meaningful category share and expand the category to those smokers who have not been prepared to switch to currently available products.”

For either BAT or JT or a new entrant to make meaningful inroads, they would need to offer a product that provides consumers with a superior sensorial and nicotine-delivery experience compared to IQOS.
Pieter Vorster, Idwala Research
Another challenge to the continued growth of HTPs is the World Health Organization’s opposition to tobacco harm reduction. In 2004, Japan joined the WHO Framework Convention on Tobacco Control (FCTC). The treaty’s guidelines are intended to assist parties in fulfilling their obligations under the Convention and are not legally binding to impose new obligations on the parties, according to Thotakura.
“Although we cannot speak on behalf of the Japanese government on the country’s stance in its involvement with the WHO and FCTC, the JT Group’s fundament lies on the belief that the use of tobacco products entails health risks and that appropriate regulations are necessary from the perspective of preventing underage smoking,” said Thotakura. “We believe that regulations in the Japanese market have already been evaluated and implemented appropriately by the relevant authorities, taking into account the environment surrounding tobacco in Japan. We will continue to operate our business in an appropriate manner in accordance with the laws and regulations of Japan and other countries/regions.”
Vorster believes that Japan’s involvement in the FCTC will have little to no impact. “Overall, the Japanese government has been slow to introduce smoking restrictions, and I suspect it is unlikely that it will change its view on HTPs because it is a signatory to the FCTC,” he said.
When asked why Japan’s success in reducing combustible use through HTPs is not viewed as a “success story” by other countries, Vorster said that few countries have embraced the principle of harm reduction when it comes to tobacco, partly because the WHO advocates abstinence. Governments, he says, are often forced to find a balance between WHO recommendations and what actually works.
“Governments can only create a regulatory and tax framework conducive to reduced-harm products being accessible and affordable and provide smokers with accurate information about the relative risks posed by these products,” said Vorster. “Consumers will ultimately decide whether they want to switch and which products they will use. The U.K. is about the only market I can think of where this is the case. When HTPs were introduced into the U.K., there was already a large and established e-vapor category, and thus far, it [the HTP sector] has had limited traction with consumers.”
Appreciating consumers’ diversifying needs, JT aspires to offer them an even greater choice of products by focusing on quality, innovation and the reduced-risk potential of products, according to Thotakura. “We believe that the options for tobacco products should not be limited to a specific category or product, but rather, it is important for consumers to have the freedom of choice to choose the most suitable product according to their preferences, living environment and life-stage transitions,” he said.

PMI is expected to launch its next generation of its IQOS, ILUMA, before the end of the year. The innovative device is supposed to play a major role in the company’s transformation, according to Olczak. “IQOS ILUMA is simple and intuitive,” explained Olczak. “It self-activates and requires less explanation, which will save time and cost of acquisition as well as aftercare and retention. It supports easier switching and higher conversion for legal-age smokers.”
PMI Chief Financial Officer Emmanuel Babeau expects consumers to embrace ILUMA. Because the product is more intuitive and easier to use than previous IQOS iterations, PMI may be able to convert smokers whom it had not been able to convert before, he said during a call with investors. “We’re going to also have a number of IQOS users or other [HTP] users switching to ILUMA because it’s really a … product with a lot of benefit for the consumer.”
JT, meanwhile, intends to continue improving consumers’ user experience through the evolution of the HTP category, and not just with hardware. JT also plans to expand its flavor portfolio to meet consumers’ diverse preferences.
JT is the parent company of Japan Tobacco International. JT directly manages the Japanese-domestic tobacco business while JTI directly manages the international tobacco business. Currently, operations and resources are distributed between these two organizations. In recent years, JT’s and JTI’s R&D functions have been cooperating to develop next-generation HTP products with the goal of introducing and expanding these products on a global scale, according to Thotakura.
In the second half of 2021, the company intends to launch Ploom X—first in Japan, then in Russia and other markets.
Starting in 2022, the JT Group will combine its Japanese and international operations into a single business. “We will utilize the entire JT Group’s resources to provide products and services that exceed the needs and expectations of consumers,” said Thotakura.
There is no denying the role HTPs have played in reducing the number of combustible cigarette smokers in Japan. Vorster said the world should take notice. “Japan has been a showcase for many years now of reducing the harm caused by combustible cigarettes,” he said. “Whilst the category’s growth will likely slow without the introduction of more satisfying products, there is no evidence of that yet.”
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

July 1, 2021
Japan: Cigarette Sales Drop Below 100 Billion

Photo: Colleen WIlliams
Cigarette sales in Japan fell below 100 billion in 2020 for the first time in decades as more smokers embraced tobacco-heating products, reports Japan Today, citing industry data.
In the year that ended in March, cigarette sales plunged by a record 16.3 percent from the year before to 98.8 billion sticks, the lowest since fiscal 1990 when comparable data became available, according to the Tobacco Institute of Japan.
The figure represents more than a 70 percent drop from fiscal 1996 when sales peaked at 348.3 billion cigarettes.
In 2019, 27.1 percent of men and 7.6 percent of women regularly smoked, down from 29 percent and 8.1 percent, respectively, from the year before, the survey showed.
Smokers in Japan purchased 41.3 billion heated-tobacco products in 2020, equivalent to some 40 percent of rolled cigarette sales.
Industry officials attributed the growing popularity of tobacco-heating products in part to the Covid-19 pandemic. While coronavirus lockdowns created more opportunities to smoke at home, many teleworkers opted for tobacco-heating products to avoid releasing smoke inside their homes or on balconies.
In April, Japan banned smoking in government buildings, eateries, hotel lobbies and workplaces.
In May, Philip Morris International CEO Jacek Olczak said the company expects to stop selling combustible cigarettes in Japan within the next 10 years to 15 years.
Japan Tobacco, which saw falls in revenues and profits in 2020 due to slumping sales of combustible products, hopes to restore its performance by launching a new heated-cigarette product this summer.
June 28, 2021
No PMI Cigarettes in Japan Within 10 Years

Photo: beeboys
Philip Morris International (PMI) plans to stop selling cigarettes in Japan within 10 years.
In an interview with Nikkei, Jacek Olczak, who took over as the company’s CEO on May 5, predicted that Japan will become a smoke-free society within 10 years. PMI expects to gradually pull out of combustible tobacco products elsewhere over the next 10 to 15 years, and Olczak said he wants the transition to happen first in Japan.
According to Olczak, the company will be focusing on its heat-not-burn (HnB) products instead. In 2016, PMI began selling its IQOS HnB device nationwide in Japan. The company held a 70 percent share of Japan’s market for such products in 2019, according to Euromonitor International—far ahead of its rivals Japan Tobacco, with 10 percent, and British American Tobacco, with 20 percent.
Smokeless tobacco, which includes HnB and e-cigarettes, made up 11 percent of Philip Morris’ total shipments of 704.6 billion cigarettes in 2020, up 3 percentage points from 2019. The global market for combustible cigarettes has shrunk by just under 10 percent over the past four years.
Smokeless tobacco products are currently sold in 66 countries and regions, and Olczak said he wants to increase that to 100 percent by 2025.
Nearly 30 percent of all Japanese tobacco sales are now heated products. Part of their success is due to the country’s ban on e-cigarettes sales and its comparatively accommodative regulatory framework.
When Japan last year prohibited smoking in restaurants, it made an exception for HnB products, which can be consumed while eating or drinking if certain conditions are met, such as having ventilation equipment in place.
In 2019, tobacco companies sold 118.1 billion cigarettes in Japan, around one-third of the peak in 1996.

Jacek Olczak
Olczak said Philip Morris would introduce devices that use new technologies and consider expanding the functionality of heated devices. In addition to providing an age verification function to prevent minors from smoking, the company will also begin developing an application to help smokers manage their health.
Philip Morris’ sales for the fiscal year ended December 2020 totaled $28.6 billion, down 4 percent from the previous year, while its net profit reached $8 billion, up 12 percent.
May 7, 2021
Japan Cigarette Sales Plunged After HTP Entry

Photo: Colleen Williams
Between 2015 and 2019, total cigarette sales in Japan dropped by 34 percent, which can be associated with the commercial launch of heated tobacco products (HTPs), according to a white paper prepared by Frost & Sullivan and Philip Morris International (PMI).
Titled Tobacco Harm Reduction and Novel Nicotine and Tobacco Products: Evidence from the Japanese Market, the report covers the impact of the commercial launch of novel nicotine and tobacco products (NNTPS) on tobacco use in japan and discusses the regulatory approach that the Japanese government is taking with regard to these products. It focuses on the Japanese market because HTPs have been commercially available in the country since 2013, and Japan is the largest market for HTPs, despite the absence of a formal THR policy to encourage this.
“The commercial availability of HTPs in Japan is associated with a significant drop in conventional cigarette sales, well ahead of the previous rate of decline,” explains Mark Dougan, consulting director, healthcare, Frost & Sullivan.
“Moreover, even after HTPs became available, sales of all tobacco products (HTPs and conventional cigarettes) continued to fall. Although there is mixed evidence, data from the 2019 National Health Survey indicates that 76 percent of consumers who use HTPs do so exclusively. Only 24 percent of HTP users maintain dual-use.”
According to Dougan, the Japanese government is differentiating HTPs from conventional cigarettes in regulations such as taxation, health warnings and indoor use restrictions, with HTPs generally receiving less-stringent regulatory settings than conventional cigarettes.
Frost & Sullivan also noted that the availability of HTPs has had a low impact on the initiation of tobacco use by never-smokers and re-initiation by former smokers. In addition, HTPs are also less likely to cause household fires than conventional cigarettes, which are the leading cause of household fires in Japan.
The remarkable recent decline of smoking Japan was also covered during the recent GTNF by Hiroya Kumamaru, a cardiovascular surgeon and vice director of AOI International Hospital in Kawasaki.
December 3, 2020
Cashless Lowers Hurdle to Higher Prices

Photo: Colleen Williams
The rise of cashless payments in Japan is helping breach an invisible barrier to raising cigarette prices, according to an article in Nikkei Asia.
Japan’s tobacco companies have long held on to an unwritten rule to never raise the cost of a pack of cigarettes above ¥500 ($4.79), the domination of the country’s most valuable coin.
That barrier allowed for easy transactions. A consumer could walk into a shop, slap loose change on the counter and walk away with a pack.
The penetration of cashless transactions, however, has eased price sensitivity, according to Naohiro Minami, chief financial officer at Japan Tobacco.
After the company raised the cost of some cigarette products by ¥50 on Oct. 1, it experienced less “rush demand” than anticipated.
Driven in part by the coronavirus pandemic, cashless payments reached a 27 percent of all transactions last year, according to data from the Ministry of Economy, Trade and Industry (METI). Compared with other nations, however, Japan’s rate of cashless transactions remains low. Great Britain and China boast more than 60 percent penetration, according to METI, and the proportion in South Korea is above 90 percent.
November 11, 2020
Japan: Smoking Drops to Record Low

Photo: Colleen Williams
Japan’s smoking rate fell to a record low last year, reports NHK World, citing to a government survey.
The health ministry surveyed about 5,700 people aged 20 or over last November.
The percentage of men and women who regularly smoke stood at 16.7 percent. That’s down 1.1 percentage points from a year earlier, and the lowest since the survey began in 1986.
The ratio for men was 27.1 percent, down 11.1 points over the past decade. The figure for women was 7.6 percent, down 3.3 points over the same period.
During the recent virtual Global Tobacco & Nicotine Forum, experts attributed Japan’s rapid decline in traditional smoking to the emergence of heated tobacco products.
Of male smokers who participated in the recent survey, 27.2 percent said they use heated tobacco products, while 25.2 percent of female smokers said they do so.
The health ministry aims to lower the smoking rate to 12 percent by fiscal 2022.
October 30, 2020
Japan Council Sets 2021 Leaf Prices and Cultivation Area

Photo: Kanenori
Japan’s Leaf Tobacco Deliberative Council has set the domestic tobacco cultivation area at 5,970 hectares for 2021, a decrease of 5.7 percent compared to the 2020 cultivation area.
The leaf tobacco purchase price will increase by 0.62 percent from last year to an average of ¥1,924.15 ($18.32) per kilogram for all leaf types.
The Leaf Tobacco Deliberative Council confers on matters concerning the cultivation and purchase of domestically grown leaf tobacco in response to inquiries by Japan Tobacco (JT).
Currently chaired by Yoshitsugu Minagawa, the council consists a maximum of 11 members, appointed by JT and approved by Minister of Finance from among representatives of domestic leaf tobacco growers and academic scholars.
October 26, 2020