Japan Tobacco International to Increase Cigarette Prices by 75%
Japan Tobacco International is the world’s third largest cigarette manufacture, lifting its position in almost three years due to speculation it can raise prices more than the tax increases advised by the health minister.
Japan Tobacco drove 6% to 370,000 yen, the highest intraday level since October 2008. Tobacco taxes in Japan have to be increased until the mean price of a package of cigarettes will constitute 700 yen ($9.15), or 75% higher than the present level, in order to reduce medical costs, Health MinisterYoko Komiyama stated in an interview.
“Tax increases will bring to Japan Tobacco’s revenue growth. If the price will be over 500 yen, it will affect the sales of tobacco, but tobacco companies can still increase revenue when their price growth reflects the higher costs, stated Mikihiko Yamato, a research partner at Japan Invest KK.
The ministry will try to increase tobacco taxes by 100 yen annually for three years.
“At that level, we can hope some people will have the desire to stop smoking, while maintaining the level of tax revenue. I think that it is also the best way to prevent smoking among teenagers,” said Komiyama.
Approximately 10% of Japanese under 20 had lighted up at least once, with 1.2% of them smoking every day, according to a statistics sponsored by the health ministry in 2007.
Attempt to increase taxes have been impeded by government possession of a controlling stake in Japan Tobacco and worries that tax revenue may drop for a country facing the world’s largest public debt.
The tax panel conducted by the Finance Minister Jun Azumi, advises dropping the government’s stake in Japan Tobacco to a third from about half. The manufacturer of Camel and Winston cigarettes has obtained 23% this year in Tokyo trading, valuing at market at 3.7 trillion yen, or $48 billion.
“It is evident that the government will sell a particular amount of Japan Tobacco shares, which will simplify the way company is doing business,” Japan Invest KK’s Yamato said.
The mean price of a package of 20 cigarette raised by 33% last October to 400 yen, or about $5.20. For instance in New York City the average price is $10.80.
Japan Tobacco analysts predict an 11% increase in revenue this fiscal year after raising prices in Russia and other tobacco markets.
The volume of cigarette sales dropped after a tax increase in October lifted prices, according to Japan Tobacco.
The plan to raise taxes comes after the manifesto of the acting Democratic Party of Japan, Komiyama stated. The given manifesto requires canceling the law that the government owns more than half of Japan Tobacco’s shares and states all tobacco-related issues should be added in the health agenda.
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