On October 1, the liquor taxes in Japan will be revised for the first time since 2006, which will see an increase of for wine while a decrease for sake.
The purpose of this revision is to eliminate the differences in liquor taxes among similar groups of alcoholic beverages to achieve what the Japanese government calls “a balance”.
In Japan, liquor taxes and consumption taxes are imposed on different alcoholic beverages. For imported wines and spirits, they are subject to additional custom taxes.
The revision next month involves liquor taxes which producers and importers of alcoholic beverages should pay.
The taxes for sake and wine will be adjusted to have the same rate. Currently, the liquor tax for sakes is 120 yen/litre, while that for wines is 80 yen/litre, much cheaper than that for sakes. The government has announced that it plans to eliminate this imbalance in two phases. In phase one, to be implemented this October, the liquor tax for sakes will be reduced to 110 yen/litre, while that for wines will be increased to 90 yen/litre. By October 2023, the liquor taxes for both sakes and wines will be 100yen/litre.
As a result of the revision in October, sakes will have a tax decrease of 7.2 yen per 720 ml (a normal bottling size), while wines will have a tax increase of 7.5 yen per 750 ml.
Facing this change in taxes, the consumer market for sakes and wines seems to have reacted calmly, without any confusion. One reason may be the limited range in the increase/decrease of price. Of course, this tax increase will have an impact on cheaper wines; however, for mid- and high-end wines, the impact on the price will be limited.
Another reason is that the reactions of producers and importers differ. Major wine importers, which are also major beer companies, announced the increase in their sales prices; however, some medium- or small-sized importers decided to keep the same prices rather than increasing them. Also, some major sake producers have announced a decrease in their prices, while other medium- or small- sized producers decided not to change their prices, because they have absorbed the recent material and transportation cost increases.
Retailers’ reactions have also been varied. Some retailers will increase their retail prices from October 1, but other retailers, especially medium- or small- sized retailers, do not know yet whether to increase their prices from October 1, as a lot of work required to change the price tags for just a seven to eight yen increase. As a result, for sakes and wines, a temporary change in demand, such as last-minute demand or holding-off buying, is not seen at this time.
Beers have a different story. The Japanese Liquor Tax Act classifies beers into three categories, namely beers, low-malt beers and beer-like beverages.
Roughly speaking, “beers” use malt which shares more the 50% of materials and designated auxiliary materials. If the ratio of malts is less than 50% or undesignated materials are used, they are “low-malt beers”. Beer-like beverages are made from materials other than barleys and malts, or a blend of “low-malt beers” and other alcoholic beverages such as spirits.
Beer-like beverages offer beer-like tastes with a cheaper price than that of beers; therefore, they can adequately meet household budgets. Current liquor taxes are 220yen/litre for beers, 134.25 yen/litre for low-malt beers (the ratio of malts is less than 25%) , and 80 yen/litre for beer-like beverages.
The government plans to adjust their taxes in three phases and finally apply the same tax rate for all three categories, to be 155 yen/litre in October 2026.
The current average retail price for a 350ml of beer is around 210 yen, while price for beer-like beverages is around 110-120 yen. In the first phase of adjustment , from this October, a liquor tax for beer will be reduced by 7 yen/350ml, while beer-like beverages will be increased by 9.8 yen.
For beer-like beverages, this will have an impact. Already many producers of beer-like beverages have increased the volume of production in order to meet the last-minute demands in September. In the last weekend of September, cases of beer-like beverages have been piled up in the volume retailers and many consumers rushed to buy them.
It will be interesting to see to what extent will the demand for beers increase after the tax decrease.