Japan's tax changes on heated tobacco threaten JTI product growth this year, CFO says
A woman poses with a cigarette in front of JTI (Japan Tobacco) logo in this illustration taken July 26, 2022. REUTERS/Dado Ruvic/Illustration
Feb 13 - A tax increase on heated tobacco products in Japan this year could curb growth, Japan Tobacco International's finance chief Vassilis Vovos told Reuters, adding the company would put up the price of its brands throughout the year to ease disruptions.
JTI, the tobacco unit of Japanese conglomerate Japan Tobacco that makes Winston and Camel cigarettes, has been rapidly expanding its heated tobacco device Ploom in Japan, the world's largest market for heated tobacco products currently dominated by U.S.-listed rival Philip Morris International.
Heated tobacco products currently attract a lower tax rate than cigarettes. A Japanese government plan to remove that advantage would lead to heated tobacco being taxed exactly like traditional tobacco, prompting price rises, Vovos said in an interview late on Thursday.
"This increase is a significant one, and it could be in the area of 70 to 90 yen," he said, referring to the impact on the retail price, adding this could also reach 100 yen ($0.6513) after the sales tax.
Lower pricing has helped increase the appeal of heated tobacco, and the change could lead to slower growth, Vovos warned, though he added any impact would be temporary.
Heated tobacco devices heat up sticks of ground-up tobacco for users to inhale rather than burning it, a process that the companies say can reduce exposure to harmful chemicals produced via combustion and therefore smoking-related harms.
JTI raised the price of its heated tobacco products by 30 yen in January, and would make smaller increases throughout the year to account for the tax change, rather than hiking prices in one go, Vovos said.
The company grew adjusted operating profit by 23.5 per cent at constant currency in 2025 thanks to factors including higher sales and pricing of its traditional tobacco products and growth in newer product lines like heated tobacco and vapes.
Ploom, the focus of the company's efforts to develop new revenue streams, grew volumes more than 38 per cent over the year, driven by gains in Japan where it reached 14.4 per cent share of the heated tobacco category.
($1 = 153.5400 yen)
