Japan Tobacco

History

Japan Tobacco is the successor entity to a nationalized tobacco monopoly first established by the Government of Japan in 1898 to secure tax revenue collections from tobacco leaf sales. In 1904, the government's leaf monopoly was extended to a complete takeover of all tobacco business operations in the nation, including all manufactured tobacco products such as cigarettes. The ostensible reason for the expansion of control was to help fund the 1904 Russo-Japanese War, but because all foreign tobacco interests in Japan at the time were forcibly evicted under the monopolization scheme, this also protected the domestic tobacco business for nearly eighty years.

The business operated within the Japanese government as an arm of the nation's Japanese Ministry of Finance until 1949 when the Japan Tobacco and Salt Public Corporation (日本専売公社, Nippon Senbai Kōsha) was established to enforce restrictive labor relations policies under the U.S. and allied forces' Occupation of Japan. The Japan Tobacco and Salt Public Corporation remained a complete state monopoly under direct Japanese Ministry of Finance authority until 1985, when Japan Tobacco, Inc. was formed as a publicly traded stock company. With periodic incremental sales of the public's ownership beginning in October 1994, Japan Tobacco became two-thirds owned by the Japanese Ministry of Finance in June 2003, and the ministry continued to own 50% until March 2013. It was announced in May 2012 that the government would sell one-sixth of the company's outstanding shares to raise ¥500 billion to finance reconstruction from the 2011 earthquake and tsunami. In 2013 the Japanese government disclosed the details of its plans to reduce its equity interest in Japan Tobacco by $10 billion, devoting the proceeds to reconstruction in northeastern Japan. The ministry of finance sold the stock in March 2013, selling about 333 million of the 1 billion shares it owned at that time. The government remains required by law to own at least one-third of JT's stock.

JT International (JTI), acquired in 1999 from R.J. Reynolds, is an operating division of Japan Tobacco Inc., handling the international production, marketing and sales of the group's cigarette brands. It sells Camel, Salem, and Winston brands outside the USA.

Japan Tobacco also operates in foods, pharmaceuticals, agribusiness, engineering, and real estate. It left the beverage industry in September 2015.

Japan Tobacco completed the largest ever foreign takeover in Japanese history through acquisition of Gallaher Group plc in April 2007. Japan Tobacco runs the Tobacco and Salt Museum in Shibuya, Tokyo.

Japan Tobacco controls 66.4% of the cigarette market in Japan and will seek more takeovers from 2009 to build on the 1.4 trillion JPY (USD 15 billion) purchase of Gallaher Group, with then-President Hiroshi Kimura commenting that further acquisitions would be appropriate after the full integration of Gallaher by 2009. In 2006/2007 Japan Tobacco planned to start Serbia production, and also planned to invest another $100 million. JT paid "$35 million euros" [sic] for 98.5 percent of Senta Tobacco Industry in May 2006, with a further $10 million invested since then. The plant has a production capacity of some five billion cigarettes a year.

In April 2012 it was announced that Mitsuomi Koizumi would become President, and president Hiroshi Kimura would become Chairman of JT. and Chairman Yoji Wakui would retire. Wakui had previously been a bureaucrat at the ministry of finance. Koizumi assuming the presidency meant that for the first time since the 1985 privatization neither president nor chairman was from the ministry of finance. Koizumi, who had been Executive Deputy President, became president in June 2012.

As of 2013, although tobacco consumption was declining, the Japanese remained heavy smokers, consuming an average of 1,800 cigarettes a year, compared to about 1,000 per capita in the United States.

On October 30, 2013 JT announced that it would close four Japanese factories and cut 1,600 jobs in Japan through voluntary retirements. This was planned to be completed by March 2016. JT also planned to consolidate 25 branch offices into 15 regional headquarters, and close leaf-processing and vending machine operations.

In September 2015 it was announced that JT would buy the rights for Natural American Spirit outside the US for $5 billion.

Lawsuits

There have been a number of Japanese cases related to smoking, either directly or indirectly related to JT.

1980-1987 JNR Shinkansen lawsuit

A group of nonsmokers sued at the Tokyo District Court demanding that Japanese National Railways shinkansen (bullet trains) provide more non-smoking cars. The case was filed in 1980 and while the court recognized tobacco's health risks the March 27, 1987 ruling rejected the lawsuit on the basis that the plaintiffs had failed to prove their harm to be “beyond the limits of toleration”.

1998-2005 Tokyo lawsuit

In 1998 seven plaintiffs represented by lawyer Yoshio Isayama sued JT at the Tokyo District Court for ¥70 million compensation (¥10 million per plaintiff) for health damage caused by smoking JT cigarettes. While similar cases had been filed in Nagoya, this was the first such case in Tokyo. In addition to financial compensation, the plaintiffs also demanded:

The plaintiffs' case was dismissed by the district court on October 21, 2003. The court agreed with the 1980s ruling that tobacco had health risks, but said that there was no causal link between the smoking habits and the specific diseases of plaintiffs. In addition, Judge Kikuo Asaka denied that nicotine was highly addictive. Isayama said that the group would appeal the decision to the Tokyo High Court.

On June 22, 2005 the Tokyo High Court dismissed the case, by that time brought by only six plaintiffs. Three of the plaintiffs had died during the course of the case. Judge Toshinobu Akiyama said he agreed with the District Court decision. Jun Araki, the son of one of the deceased plaintiffs, said: "This ruling placed priority on the annual 2.3 trillion yen in [tobacco] tax revenue over the precious lives and health of the Japanese people". He also said the plaintiffs would appeal to the Supreme Court.

2005-2010 Yokohama lawsuit

In January 2005 plaintiffs Kenichi Morishita, Koreyoshi Takahashi, and Masanobu Mizuno filed a case in the Yokohama District Court against JT seeking ¥30 million in damages for smoking related illness. Morishita died of pneumonia while the case was being fought, and JT used the same argument as in the 1998-2005 Tokyo case, that smokers were free to quit any time and that cancer and other illnesses had multiple causes.

On January 20, 2010 the court clearly ruled that there was a link between smoking and lung cancer and respiratory illnesses, and said that smoking may be addictive. However, the court rejected the demand for damages, and said that the plaintiffs had smoked of their own free will and that there was no proof that smoking had directly caused their sicknesses.

JT flagship brands

Smoking etiquette posters

JTI runs a series of posters designed to educate smokers about smoking etiquette. They can be seen widely around Japan, especially located near train stations. Poster gallery

Environmental record

Japan Tobacco had recent health issues involving their company. Contaminated gyoza dumplings made by a Chinese company's factory in China, which sold its products to JT, poisoned ten people, including a five-year-old girl. Thousands of other Japanese people were going to the hospital because of stomach issues as well. A number of dumplings were found containing dichlorvos and methamidophos from pesticide. The health minister of Japan said the contamination at the Chinese factory was possibly intentional, and the police are investigating for an attempted homicide. The dumplings were from China, but Japan Tobacco has said it does not plan to cease its manufacturing in China. Frozen food sales went down by 60% for the business since this health scare. Japan Tobacco's stock price fell 7.1% after they were forced to recall their products, and the company also lost a $500 million merger deal with Nissin Foods because of this incident.

Anti-Illicit Trade Compliance

Japan Tobacco Inc, through its international operating divisions JT International S.A. and JT International Holding BV, signed a Cooperation Agreement with the European Commission in 2007 to combat the illicit trade in cigarettes under Article 9 of which the company agreed to “pro-actively disclose” to the European Commission’s Anti-Fraud Office (Office Europeen de Lutte Antifraude – OLAF) “…all material information coming into (its) possession after the Execution Date relating to potentially Illegal Product.” The Agreement defines “Illegal Product” as Contraband or Counterfeit Cigarettes. Both Japan Tobacco Inc and JT International S.A. claim to adhere to a “zero-tolerance approach” to illicit trade.

JT International S.A. and several of its distributors, including Megapolis in Russia and IBCS Trading in Cyprus, however, have been implicated as recently as 2011 in widespread smuggling to include selling cigarettes to a buyer in Syria subject to EU, Swiss, and US Sanctions and diverting cigarettes from Russia into the European Union and smuggling Winston and other popular cigarette brands into Iran. A JT International S.A. executive told the Wall Street Journal in August 2012 that the firm had continued to ship cigarettes to Syria until as recently as February 2012, almost a full year after the imposition of EU and US sanctions. The Journal cited Syrian dissident sources who claimed that the government of Syrian President Bashar al-Assad uses cigarettes as payment for the irregular military forces and militias, known as the shabeeha, who have had a central role in its violent crackdown.

Company documents show that in 2010 the head of the JT International SA security office – who performed a similar function at the former Gallaher Group PLC – sought to destroy evidence linking up to 13 company officers to smugglers in the Balkans region; a parallel effort was then being run by company management to hack into the emails of company anti-smuggling investigators, competitors, and law enforcement.

The firm also announced in 2011 that it had purchased the largest cigarette producer in Sudan and South Sudan as part of an effort to expand sales in the war-torn region, which has emerged as an entrepot for cigarette smuggling.

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