In Japan, a nation of epicures, the local beers aren’t always palate pleasers. Connoisseurs blame the taxman. The Finance Ministry imposes higher taxes on drinks with greater malt content. So the biggest breweries, including Asahi Group Holdings Ltd. and Kirin Holdings Co., sell knockoffs, called happoshu (meaning bubbly spirits), or third beer, that may use peas, corn, or soybeans to reduce the amount of flavorful malt. “A lot of time, energy, and money has been wasted coming up with some really bad drinks—and it’s because of the tax system,” says Tatsuo Aoki, owner of the Tokyo bar Popeye.
Craft brewers, which account for about 2 percent of beer sales in Japan, say the tax incentives have given bigger companies an advantage and allowed the substitutes to dominate the market, because they cost a lot less. Meanwhile, some expensive-to-make special brews with exotic ingredients must be advertised as the cheap stuff because their recipes don’t meet official definitions of beer—which regulations define, in part, as having at least 67 percent malt content. “I view the entire beer-tax regime in Japan as a colossal bad joke,” says Bryan Baird, a co-founder of Baird Brewing Co., one of 265 craft brewers in Japan.