Japan Tobacco’s Full Privatization Worth Considering, Abe SaysChris Cooper and Masaaki Iwamoto
Japanese Prime Minister Shinzo Abe said the government should consider selling its remaining stake in Japan Tobacco Inc. as the country debates raising funds to pay for a corporate tax cut.
Abe responded to a question from a lawmaker in parliament in Tokyo today on how he could use his leadership to create a framework for the full privatization of the company, which sells Winston and Camel cigarettes outside the U.S.
The government is planning to cut corporate taxes as part of Abe’s third arrow of reform to stimulate growth in Japan’s economy, and is seeking ways to cover that drop in revenue. Last year, the government reduced its holdings in Tokyo-based Japan Tobacco to one third from half to help fund rebuilding after a 2011 earthquake and tsunami in Fukushima.
“It’s worth studying,” said Abe. “Still, it’s possible that JT will stop buying tobacco from domestic farmers if it’s fully privatized. It’s also important to think about how to deal with that issue.”
Under a law passed in 2011, the government can sell one-third of its 50.01 percent stake to help pay for reconstruction after the 2011 disaster. It cut its stake to 33 percent last year to raise 978 billion yen ($8.6 billion).
Japan, which is considering raising its sales tax again next year, has the heaviest debt burden of any country.
Japan Tobacco said it is ready for full privatization in the future as it has been rationalizing its business and growing its international reach, while working to strengthen corporate governance, according to an e-mailed statement after Abe’s comments.
The company rose 4.4 percent in Tokyo trading today, before Abe’s comments. The Nikkei 225 Stock Average gained 2.7 percent.