Tobacco market in Japan - statistics & facts
Japan used to be referred to as a smokers’ paradise, where lenient tobacco control regulations and low retail prices for a packet were low barriers to lighting a stick. Through its ties to the Government of Japan via the Ministry of Finance which also benefits from the high tax revenues, the tobacco industry flourished in a regulated but in large parts unrestricted market with paper-rolled cigarettes at its center. But the last decade brought drastic changes in domestic smoking regulations as Japan faced pressure from outside during its function as a host to several international sporting events, with the media spotlight focused on the 2020 Summer Olympics in Tokyo. Health concerns revolving around passive smoking resulted in tighter regulations on smoking in public. While it did not necessarily translate into large-scale smoking cessations, consumer interest in alternatives to the traditional stick revived other product segments.
Following the reduction of tariffs as well as the lifting of restrictions on advertisement and distribution channels for overseas businesses, Philip Morris International and British American Tobacco successfully established their presence as a competitor within the Japanese market. Even though transnational businesses are not authorized to produce tobacco products within the country’s border, their imported products became one of the most sold cigarette brands in Japan.
As the restrictions are particularly targeting the combustible tobacco segment, consumers are looking for alternatives to enjoy smoking in public. E-cigarette distribution is heavily restricted in Japan due to the classification of liquids containing nicotine as medicinal products. Therefore, heated tobacco products were the main non-combustible products garnering consumer interest. With the sales of heated tobacco sticks rising, Japan Tobacco, Philip Morris International, and British American Tobacco are vying for consumers contemplating giving up cigarettes in favor of the smoke-free alternatives. Their flagship products Ploom, IQOS, and glo are already benefitting from the attention as the driving brands in the revived heat-not-burn segment, which is exempt from most smoking bans.
A monopoly building a smoky paradise
As the successor to a formerly state-owned monopoly, Japan Tobacco, Inc. was formed as the only authorized manufacturer of tobacco products in Japan with the government as a shareholder. In turn, the public company upholds the domestic industry by entering into a contract with local tobacco farmers to purchase their annual harvest of leaves. Before the import market was gradually deregulated, Japan Tobacco was also the manufacturer and distributor of foreign brands like Marlboro through license agreements.Following the reduction of tariffs as well as the lifting of restrictions on advertisement and distribution channels for overseas businesses, Philip Morris International and British American Tobacco successfully established their presence as a competitor within the Japanese market. Even though transnational businesses are not authorized to produce tobacco products within the country’s border, their imported products became one of the most sold cigarette brands in Japan.
Tightening smoking regulations – smokers in an evaporating paradise
Japanese consumers used to be heavy smokers, with the low prices and lenient regulations supporting consumption habits. However, recent trends are hinting at a drastic change of direction as the industry is facing a shrinking market, declining smoking rates, and extensive bans for indoor areas on a prefectural level. While restrictions are still lenient in an international comparison, lighting a cigarette became prohibited in most public areas and food service establishments on an unprecedented national level.As the restrictions are particularly targeting the combustible tobacco segment, consumers are looking for alternatives to enjoy smoking in public. E-cigarette distribution is heavily restricted in Japan due to the classification of liquids containing nicotine as medicinal products. Therefore, heated tobacco products were the main non-combustible products garnering consumer interest. With the sales of heated tobacco sticks rising, Japan Tobacco, Philip Morris International, and British American Tobacco are vying for consumers contemplating giving up cigarettes in favor of the smoke-free alternatives. Their flagship products Ploom, IQOS, and glo are already benefitting from the attention as the driving brands in the revived heat-not-burn segment, which is exempt from most smoking bans.
