Japan Lawmakers Seeks Second Increase in Tobacco Tax

Japanese lawmakers are seeking to increase tobacco taxes for a second straight year to curb rising health-care costs in a country where cigarettes sell for less than half the price they do in New York City.

“We should aim to boost the tax again next fiscal year,” Yoko Komiyama, a member of Japan’s ruling party and a leader of a group of about 70 lawmakers seeking higher cigarette levies, said in an interview in Tokyo. “The planned increase next month is just the first step and isn’t nearly enough.”

Efforts to raise taxes in the nation where smoking kills about 100,000 people a year have been complicated by the government’s ownership of a controlling stake in Japan Tobacco Inc., the world’s third-biggest publicly traded cigarette maker. More than a third of Japanese men smoke, about double the proportion of the U.S. and U.K.

An average pack of 20 cigarettes in Japan will go up by 33 percent to 400 yen ($4.75) on Oct 1. New York City raised taxes in July, pushing the average price to $10.80.

Japan Tobacco rose 1 percent to 280,700 yen at the 3 p.m. close on the Tokyo Stock Exchange. The stock has dropped 10 percent this year compared with the 7.7 percent decline in the benchmark Topix index.

Falling Sales

Komiyama said the aim should be a price of 1,000 yen a pack, which would bring Japan in line with some European countries.

The government could raise the price by about 100 yen every year to allow the nation’s tobacco leaf farmers enough time to switch to other crops, Komiyama said.

“A consensus is growing in the government that we have to do more to discourage things like smoking that are harmful to health,” she said in an interview on Sept. 9.

Japan Tobacco, which controls 65 percent of the domestic market, “strongly opposes” a further tax increase until the affect of the October price change is assessed, the company said in a statement on Aug. 31.

The Tokyo-based company’s domestic tobacco sales slid 5.1 percent to 615.9 billion yen excluding tax in the 12 months through March. Japan Tobacco’s brands include Camel, Benson & Hedges, Mild Seven and Winston cigarettes.

Central and regional governments raise about 2 trillion yen in tax revenue each year from tobacco, according to Ministry of Finance figures. The current 300 yen price of a pack of cigarettes includes 174.9 yen in tax.

Health and other costs related to smoking may be triple what the government gains in tax revenue, Komiyama said.

Waning Demand

Japan Tobacco forecast net income to fall 3.9 percent this fiscal year, as higher tax may cut demand.

Nearly 40 percent of Japanese men smoke, compared with 22.3 percent in the U.S. and 22 percent in the U.K., according to a World Health Organization report last year. Japan Tobacco said last month the percentage of Japanese men who smoke fell to 36.6 percent this year from 38.9 percent last year.

“The price increase will prompt more people to give up smoking,” Hiroyasu Muramatsu, a doctor at Tokyo-based Chuo Naika Clinic, which offers a program to help people stop smoking. The number of patients had increased in the past six months, he said.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net.

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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