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Japan Tobacco Falls on Higher Cigarette Tax Proposal

Japan Tobacco Falls on Higher Cigarette Tax Proposal (Update2)

By Taku Kato

June 6 (Bloomberg) — Japan Tobacco Inc., the world’s third- largest publicly traded cigarette maker, fell the most in more than four months in Tokyo trading after a minister said the government may consider increasing cigarette taxes.

The stock declined as much as 5.5 percent and was 5.1 percent lower at 488,000 yen as of 1:37 p.m. on Tokyo’s stock exchange, heading for the biggest decline since Jan. 28.

Higher taxes may quicken a decline in cigarette sales in Japan, where the percentage of men who smoke has fallen by half over the past 40 years to about 40 percent because of an increase in health consciousness. Japan Tobacco’s operating income from cigarette sales in the country slid 9.4 percent to 222 billion yen ($2.1 billion) in the 12 months through March.

“Tobacco taxes are a candidate” to make up for revenue shortfalls, Economic and Fiscal Policy Minister Hiroko Ota told reporters in Tokyo today. “We need to first have a discussion on the entire tax system.”

Hidenao Nakagawa, a former secretary-general of the ruling Liberal Democratic Party, wants lawmakers to consider a proposal to triple the retail price of a pack of cigarettes to about 1,000 yen from about 300 yen, the Nikkei newspaper said today.

The government collects 2.2 trillion yen annually from cigarette duties and Nakagawa’s proposal would increase this by 8 trillion yen, the Nikkei said. Nakagawa said raising the tax rate would bring Japan cigarette prices in line with other developed countries, the report said.

Taxes account for 189 yen of the cost of a 300-yen packet.

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