Japan Tobacco Inc. (2914), the world’s third-biggest publicly traded cigarette maker, climbed to the highest in three years on speculation it can lift prices more than the tax increases proposed by the health minister.
Japanese girl lighting a cigarette
Japan Tobacco rallied 5.4 percent to 368,000 yen, the highest since October 2008, at the 3 p.m. close of trading in Tokyo. It had the second-biggest advance today on the broader Topix index, which declined 1.7 percent.
Tobacco taxes in Japan should be raised until the average price of a pack of cigarettes is about 700 yen ($9.15), or 75 percent higher than the current level, to cut medical costs, Health MinisterYoko Komiyama said.
Smoking in Japan was responsible for at least 4.3 trillion yen in medical costs and economic losses in 2005, according to the Institute for Health Economics and Policy.
“Tax increases will lead to Japan Tobacco’s profit growth,” said Mikihiko Yamato, a research partner at Japan Invest KK who recommends buying the stock. “If the price is over 500 yen, it will damage the sales of tobacco, but cigarette companies can still raise profit when their price increases reflect the higher costs.”
The ministry, which is participating in a tax panel session, will push for increasing tobacco levies by 100 yen annually for three years, Komiyama said in a Sept. 16 interview. Most panel members agreed with the idea last year, she said.
