Japan's tobacco tax revenue is likely to drop by more than ¥50 billion ($460 million) this year as more smokers switch to heated tobaccos containing less tobacco leaves, according to an estimate compiled Friday by Kyodo News and a research institute.
The fall is sure to prompt the government into reforming the tobacco tax system, said Toshihiro Nagahama, an economist at Dai-ichi Life Research Institute, which helped conduct the study.
The prediction is based on an expected shift in demand from regular cigarettes to so-called heat-not-burn tobaccos, as well as a decline in the number of smokers.
Heated tobaccos produce vapor to deliver nicotine. Manufacturers claim they reduce harmful toxins found in the smoke of conventional cigarettes.
The tax on a pack of conventional cigarettes is ¥244.9. But the levy varies from ¥34.3 to ¥206.0 for heat-not-burn tobaccos, depending on the tobacco leaf content.
Without hiking the tax for heated tobaccos, the decline in annual tax revenue could widen to ¥300 billion by 2020.
"The pace of heated tobaccos' sales growth is very fast. A tax system review is certain, considering the lower tax rates compared with other countries and the current state of national and local finances," said Dai-ichi Life's Nagahama.
Japan Tobacco Inc. expects cigarette sales in Japan to shrink 13 percent this year due largely to a rise in demand for heat-not-burn tobacco.