Philip Morris cancels cigarette price hikes

Kyodo News

Philip Morris Japan has decided to cancel its planned increase in cigarette prices for fear of seeing a further fall in sales, a Finance Ministry official said Thursday.

The retail price of a pack of Marlboro and all other brands sold by the company was scheduled to be raised by ¥20 on June 1 after gaining approval in March from the ministry, which oversees the tobacco industry.

“I believe this is the first case in Japan that a tobacco company has withdrawn a plan to raise cigarette prices after obtaining permission from the government,” the official said.

Philip Morris, the second-largest seller of tobacco in Japan, informed the ministry Monday of its decision, the official said.

The company changed its policy after market research showed the possibility of a bigger than expected drop in sales if the hikes were implemented, according to the official.

A month ago, its smaller rival British American Tobacco Japan Ltd. withdrew its application with the ministry to raise its prices, citing the need to cope with the changing market environment.

Philip Morris asked the ministry in February for permission to raise prices for the first time since July 2006 to make up for declining sales.

Had the changes been realized, a pack of Marlboro cigarettes would have been ¥340.

Cigarette prices will be higher in any case because the government has decided to raise the tax by ¥3.5 per cigarette starting Oct. 1.

Japan Tobacco Inc., which has the largest domestic market share at about 65 percent, has predicted the tax hike will cause about a 20 percent plunge in overall tobacco demand.