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While disinvestment from Japan Tobacco will be problematic for the Japanese government, it is long overdue. (TOSHIYUKI AIZAWA/TOSHIYUKI AIZAWA/REUTERS)
While disinvestment from Japan Tobacco will be problematic for the Japanese government, it is long overdue. (TOSHIYUKI AIZAWA/TOSHIYUKI AIZAWA/REUTERS)

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Sensible tax deal a good start for Japan's PM Add to ...

From the FT's Lex blog



Japan is picking up the bill in the right way. Just as the devastation wreaked by the March earthquake and tsunami was spread over 18 of the nation’s 47 prefectures, the burden of payment for reconstruction will be spread over companies, households and the government itself.



The total cost of the third and biggest package will be ¥12,000-billion ($157-billion), funded by a series of temporary increases in corporate and income taxes, and the sale of the state’s entire 50.01 per cent stake in Japan Tobacco, on which it also plans to impose higher levies. The ruling party’s plans are ambitious, but basically sensible.



Take Japan Tobacco. JT’s two-thirds home-market share should allow it to raise domestic prices above and beyond any tax increase, just as it did last October, after an excise-tax hike of ¥3.5 per cigarette.



Higher taxes may not dissuade trade bidders from registering an interest in a piece of the world’s third-biggest listed tobacco company, either: an increase would simply bring Japan’s very low tax rates, about half the levels of other developed countries, closer to international norms. And while disinvestment from JT will be problematic for the government, apparently requiring changes to at least two laws, it is long overdue.



State control of the tobacco industry probably seemed a sound idea in 1904, when Japan needed to collect more tax to fight the Russians. Now, with the nation well into its eighth year as a signatory to the World Health Organization’s framework convention on tobacco control, taking profits from selling Mild Seven and Camel looks bizarre.



Persuading the Diet to pass this multifaceted package will not be straightforward. But the public seems supportive. And for Yoshihiko Noda, winning the backing of his fractious party is an achievement in itself. This prime minister, like many of his predecessors, has started well.

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