A new taxation on beer in Japan is going to turn the country’s aging beer industry upside down and is also very likely to reverse the trend of declining malt imports.
In 2020 the Japanese government starts to lower tax on ordinary beer and to increase tax on low-malt happōshu and third-sector no-malt beverages with the aim to have the same taxation on all products by 2026.
In a first step which came into effect last Sunday the definition of “beer” was changed. The minimum malt content of “beer” was lowered from 65% to 50% and the approved list of secondary ingredients was enlarged from malted only barley/wheat, hops, rice, corn, sorghum, potato, sugar/caramel, and starch to fruit, spices, herbs and flowers. Seaweed, oysters and bonito flakes (which is dried, fermented, and smoked skipjack tuna) are also allowed under the new legislation and will give beer lovers a totally new drinking experience.
“We can now do what we want,” thanks to the revised law, Kirin Holdings Co. president Yoshinori Isozaki, was quoted as saying.
The new rules also benefit imported beers like Belgian kriek lambic beers and certain North American craft beers, which could so far not be sold as "beer" in Japan due to the nature of their ingredients despite meeting the 67% malt requirement.
Up to now Japan was one of countries in the world with the steepest tax brackets for beer. Beer with a malt content of more than 67% was highly taxed with 77 Yen ($0.72) per can, low-malt beer-like beverages (happōshu) with 47 Yen ($0.44) and no-malt third beer with only 28 Yen ($0.26). The huge difference in taxation helped to support beer-like beverages with a lower malt content which are called happōshu in Japan.
When the first brews of happōshu appeared in the market in 1994 they were an instant success. Decreasing tax revenues led Japan to raise tax on happōshu to that of beer. Brewers followed suit by lowering the malt content of their products even further to below 50%. Today, most happōshu contains less than 25% malt, putting it in the lowest tax category of low-malt beer.
In order to avoid even these lower taxation brewers came up in 2004 with products that contained no malt whatsoever. Beverages made from only unmalted barley, pea protein, soy protein, or soy peptide or other alternatives instead of malt were dubbed " third beer". These products are not only taxed lower than beer or happōshu, they are also sold at a lower price and have a light, crisp taste.
However, happōshu and third beer have always been a surrogate to ordinary beer, which can also be seen on the fact that the products were never accepted by customers outside of Japan. The new legislation to come is now most likely setting an end to this Japanese peculiarity.
According to industry observers the convergence of tax rates of beer, happōshu and third category beer may in the long run favor traditional beer, because consumers do not need to evade any longer high tax rates by consuming “low malt” or “no malt” beers. It is very likely that the product range of beers in Japan will be aligned to those of other countries in the world.
It is hoped that the revised rules will also change the image of beer and drinking habits of young Japanese consumers who have been shunning beer in recent years. Last year shipments of beer and quasi-beer in Japan hit a record low for the 13th consecutive year.
Another effect will be most likely the reverse of declining malt consumption in Japan due to a higher beer production and higher contents of malt in beer. Optimists believe that Japan could be soon again one of the major malt importing countries in the world like in the early 1990s.