It’s not clear if the writer of an article that appeared on the English-language website of the Asahi Shimbun recently got his own joke, but by saying that the Finance Ministry is “creating a buzz” by proposing to lower the alcohol tax on beer, he got to the heart of the matter. The government hopes that more people will drink beer if the price goes down, thus generating more tax revenue.
At the same time, the tax rate for happōshu (malt liquor) and so-called type-three beer-like beverages will be increased so that the levy on all three categories will be the same: ¥55 for a 350 ml can. What is causing some people to scratch their heads is that it seems unlikely that sales of happōshu and type-three beverages will remain the same once their price goes up, because the only reason they sell at all right now is their low price, which is a function of their lower tax rates as determined by malt content. The Asahi reports that since sales of cheaper brews are dropping anyway, maybe a lower tax on beer will increase sales of real beer and assure a steadier flow of money into the treasury.
But maybe the reason for the tax change is something else. On his blog at the portal site Breaking News, freelance writer Sadao Arai asked in April, “Who will benefit from the alcohol sales law revision?” but he wasn’t talking about the alcohol tax. He was talking about a proposal to ban super-low prices for alcohol to protect small liquor stores that are being driven out of business by discount retailers and supermarkets. Arai, whose family used to have the monopoly on wholesale liquor business in the Nihonbashi area of Tokyo, doesn’t believe that the real reason behind this law is protecting small stores, since it’s way too late to do that.
Liquor retail laws were liberalized starting in the late 1980s. At the time, licenses to sell alcohol came with strict conditions that effectively limited sales of beer, wine and liquor to dedicated sakaya (liquor stores). In 1988, the Cabinet issued a directive for a three-year study to change the laws, and over the next decade the Diet revised the liquor retail law in piecemeal fashion.
First it removed the restriction that said a new liquor store had to be a certain distance from an existing one, thus paving the way for multiple liquor stores serving the same regional customer base. Before that law was passed, small liquor stores, especially in rural areas, enjoyed virtual monopolies in their communities. Later, during the administration of Junichiro Koizumi, whose central political goal was privatization, zoning restrictions for liquor sales were completely removed, meaning liquor could be sold anywhere in Japan.
As a result of these gradual changes, licenses to sell liquor became easier to obtain, and in conjunction with other commercial liberalization moves, such as the so-called Big Store Law, alcohol could be sold by virtually any kind of retail outlet. According to the National Tax Agency, in 1985 dedicated liquor stores accounted for 92 percent of alcohol sales, with supermarkets, convenience stores and department stores making up the remaining 8 percent. By 1995, liquor stores accounted for 66 percent of sales, and supermarkets had gained 14 percent of the market. In 2005, supermarkets’ share surpassed that of liquor stores for the first time. In 2013, the division of spoils was: liquor stores 15 percent, discount retailers 13 percent, convenience stores 11 percent, wholesaler-retailers (selling to both restaurants and the public) 10 percent, home centers and drug stores 8 percent, department stores 0.7 percent and supermarkets a whopping 37.5 percent.
Until the mid-’90s, small liquor stores were protected because it was difficult for larger retailers to get liquor licenses, but once these larger concerns were allowed to sell alcohol, they used their considerable resources to drive down prices across the board. Many liquor stores went out of business, and a good portion of those that didn’t became convenience store or retail-wholesale franchises (like the ubiquitous Kakuyasu chain) since they were actively solicited by franchise businesses looking to boost the number of their locations.
Since liberalization there has been no growth in liquor sales, which means existing liquor retailers, regardless of size, are merely vying for market share. Somebody has to be the loser. However, Arai doesn’t think the government’s proposal to set prices for alcoholic beverages is really meant to save small liquor stores. Though there is a national liquor store association that contributes to national politicians, it isn’t nearly as powerful as the big supermarket chains, and he thinks the purpose of the proposed law is to help supermarkets, who are tired of competing with one another. In the supermarket business, beer is considered a loss leader, a product whose price is set purposely low and which loses money for the retailer but gets people into their stores to buy other things. However, with beer sales flat or falling, that strategy isn’t as useful as it once was.
That was in spring, and the bill seems to have died, at least for the time being. If stores are prohibited from selling alcohol at very low prices, maybe people will stop buying alcohol and the government will definitely lose tax revenues. Consumers have gotten used to beer that’s cheaper than it was in the 1980s, and it will be difficult to get them to pay those kinds of prices again, so they have to adjust the tax rate down in order to maintain the present level of sales. Or that, at least, is the buzz.
Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month. For related online content, see blog.japantimes.co.jp/yen-for-living.