Two years after the World Health Organization’s Framework Convention on Tobacco Control (FCTC) took effect, many countries are coordinating efforts to curb tobacco use.
Nevertheless, Japan Tobacco Inc. is trying to stall moves by the central government and local authorities to restrict smoking. JT and the Finance Ministry, the majority shareholder in the company, are facing increasing public criticism for doing little to control tobacco.
For example, from last December to January, Kanagawa Prefecture authorities conducted a poll on the Internet on their plan to introduce an ordinance banning smoking at all public places. According to news reports, JT asked its employees and tobacco vendors to oppose the proposed ordinance, and the number of opponents exceeded supporters just before the deadline. Thus serious doubt was cast on the poll’s credibility.
When the Ministry of Health, Labor and Welfare last December conducted an interim review of the “Health 21 Japan” program it had proposed in 2000, JT reportedly opposed setting a numerical target for cutting the smoking rate. With the governing Liberal Democratic Party also so opposed, the revised program failed to include such a smoking rate target, as did the original plan.
If JT were an ordinary private company, such conduct might have been tolerated as a way to protect its business. However, JT is 50-percent owned by the Finance Ministry and is allowed to monopolize cigarette manufacturing under two tobacco business-related laws. JT should realize that it must cooperate with the national policy of protecting public health, instead of merely seeking profits.
The government seems apathetic toward measures to curb smoking and has been criticized for helping dilute the FCTC to promote JT sales. In an article published last year, Mary Assunta and Simon Chapman of the University of Sydney in Australia wrote:
Of the documents presented by 15 Japanese institutions at the WHO public hearing, 60 percent backed the tobacco industry, much higher than the comparable rate for overall presentations at the hearing.
Japan called for ample use of “optional language,” such as “appropriate” and “flexibility,” in the FCTC. Since the hearing endorsed the Japanese government’s position, the effect of the treaty was seriously weakened.
The Japanese government’s contention in the six negotiating sessions was very similar to JT’s argument.
The two authors paid attention to the fact that Japan was represented by a 20-member delegation at the final session, the largest among the WHO members, and that the Finance Ministry, which can be characterized as a mouthpiece for JT, sent the same number of delegates as the health ministry.
Health promotion through preventive measures, including tobacco control, against lifestyle-related diseases is a national objective. The Finance Ministry, as JT’s major shareholder, should urge the company to actively cooperate with antismoking measures. The ministry should also urge JT, while it remains financially healthy, to invest in measures to encourage tobacco farmers to switch to other crops.
In its latest annual book, JT mentioned business risk factors in the future, such as growing health concerns over smoking, increasing restrictions on smoking by law and in the private sector, and smoking-related lawsuits at home and abroad. Although it is obviously aware of the severe environment surrounding the tobacco industry, the company does not seem serious in pursuing business diversification.
For example, tobacco sales, excluding taxes, amounted to 82.8 percent of JT’s total revenues for the year ended in March, up slightly from 82.1 percent for the year ended in March 2002.
Meanwhile, JT’s spending on pharmaceutical-related research and development for the year ended in March 2006 amounted to 19.3 billion yen, down sharply from 34.5 billion yen for the year ended in March 2002. While JT says it has overhauled its R&D in an attempt to restructure its business activities, the company appears to have lost enthusiasm for pharmaceutical business.
JT’s middle-range business plan shows that the company remains intent on maintaining and expanding its tobacco business. Domestically, JT plans to maintain the present level of tobacco-related EBITDA (earnings before interest, taxes, depreciation and amortization); overseas, the company seeks annual percentage growth of such EBITDA in the midteens to lead earnings growth for the JT group.
As part of its overseas business plans, JT in April completed the process for purchasing Gallaher Group PLC, the major British tobacco company. JT apparently intends to take advantage of a major foreign manufacturer’s brand to make inroads into developing country markets where public consciousness of health dangers is low.
This approach seems irresponsible. The strategy is incompatible with the spirit of the FCTC. In addition, JT could be forced to scale back its operations overseas, as it was in Japan, if overseas demand for tobacco decreases.
The Japanese Society for Tobacco Control, a nonprofit organization, charges that JT’s purchase of the Gallaher Group is shameful for Japan, as it is intended to make foreign people dependent on tobacco. The society contends that the tobacco industry should be phased out through the implementation of the FCTC.
Tobacco industries of the world are at a crossroads in the face of restrictions under the FCTC, so it is perplexing that JT has failed to get out of its tobacco-dependent operations. Taking into account the views of the nonprofit organization, the Finance Ministry should conduct a thorough review of JT’s operations and the tobacco business law that gives a legal basis to the company.
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