Japan can advance both defense and health through alternative approaches to HTPs taxation

Amid the delicate balance of Zen gardens and bullet trains, Japan stands on the verge of a historic misstep. As heated tobacco products (HTPs) are poised to overtake conventional cigarettes in sales — marking an unprecedented public health milestone — the Japanese government has announced plans to raise taxes on these innovative alternatives.

Japan's Remarkable Quitting Success

In just seven years, Japan has reduced cigarette sales by an astonishing 52%. This achievement stems from the voluntary adoption by millions of Japanese smokers of heated tobacco products as a less harmful alternative.

David Sweanor, adjunct professor of law at the University of Ottawa and tobacco regulation expert, notes, “Japan has accomplished spectacular things in a very short period of time with regard to cigarette smoking.” The annual decline in cigarette sales accelerated dramatically from approximately 3% before 2016 to around 11% following the introduction of these innovative products.

Affordability Challenge

Unfortunately. Japan's proposed tobacco tax policy will significantly undermine the affordability of HTPs. The government plans to first raise taxes specifically on heated tobacco products to match cigarette rates, followed by three additional tax increases through April 2029.

This targeted approach to taxation will eliminate the price advantage that heated tobacco products currently enjoy, creating a substantial economic disincentive for smokers considering the switch to less harmful alternatives. By equalizing the tax burden between conventional cigarettes and heated tobacco products, the government is effectively removing one of the primary motivations for consumers to choose the safer option.

Quantifiable Health and Economic Benefits at Risk

Research done by scholars from the University of Tokyo and University of Vienna demonstrates significant benefits: if 50% of smokers replaced combustible products with HTPs (assuming a 70% risk reduction), Japan could avert 12 million patient cases, saving approximately 454 billion yen ($3 billion) in healthcare costs.

A systems dynamics model published in 2020 projected that HTPs in Japan could save an estimated 13 million life-years by 2100 compared to a smoking-only scenario. Even with conservative risk reduction estimates of 10-50%, the model still predicted significant population health gains.

Unintended Consequences of Well-Intentioned Policy

While the government’s desire to increase revenue for defense purposes is understandable, doing so at the expense of public health represents a policy failure. The planned tax hikes risk reversing progress through:

1. Price Sensitivity: Research shows tobacco consumers are highly price-sensitive.
2. Smoker Recidivism: Current HTP users may revert to conventional cigarettes if price differentials narrow.
3. Stunted Innovation: Higher taxes could hamper further development of reduced-risk products.
4. Perverse Health Impacts: Discouraging the switch from cigarettes to HTPs could inadvertently sustain smoking-related diseases.

A Path Forward

Japan still has time to reconsider this counterproductive tax policy. Rather than treating all tobacco products as equivalent, a risk-proportionate approach to taxation would maintain incentives for smokers to switch to less harmful alternatives. Researchers recommend encouraging smokers to switch to reduced-risk products, raising awareness of health risks, and adopting a harm-based taxation model.

Supporting national defense and public health need not be mutually exclusive. By preserving the affordability advantage of HTPs while potentially increasing taxes on conventional cigarettes, Japan could generate needed revenue while continuing its remarkable progress in reducing smoking-related harm and potentially offering a blueprint for tobacco harm reduction strategies worldwide.

Federico N. Fernández is CEO of We Are Innovation, a global network of 45+ think tanks and NGOs. His expertise and passion for innovation have earned him recognition from prestigious publications such as The Economist, El País, Folha de São Paulo, and Newsweek. He has also delivered inspiring speeches and lectures across three continents, authored numerous scholarly articles, and co-edited several books on economics. 

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