Japan Wants To Neutralize Craft-Beer Forgeries By Equalizing Taxes

Craft beer
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The Japanese craft-beer industry is about to see a big change—starting in 2020.

Currently, Japan’s Finance Ministry imposes higher taxes on beverages with higher, malt content. Because of this, big-brand breweries are forced to brew beer without malt. Breweries like Asahi Group Holdings Ltd. and Kirin Holdings Co. sell knockoffs called happoshu or third beer.

These “knockoffs” may use peas, corn or soybeans to reduce the amount of flavorful malt. “A lot of time, energy and money has been wasted coming up with some really bad drinks—and it’s because of the tax system,” Tokyo’s Popeye-bar-owner Tatsuo Aoki said.

Craft Brewers are saying “the tax incentives have given bigger companies an advantage and allowed the substitutes to dominate the market, because they cost a lot less.”

And the breweries that brew the “expensive-to-make special brews with exotic ingredients” are forced to advertise their beer as the cheap ones. This is because beer must have 67-percent malt to be officially defined as beer according to regulations.

“I view the entire beer-tax regime in Japan as a colossal bad joke,” Baird Brewing Co. co-founder Bryan Baird said. He helps run and operate one of 265 craft brewers in Japan.

The new tax regime:

Starting in 2020 and continuing through to 2026, tax rates for beer and substitutes will change. This comes as an effort by the Finance Ministry to boost the competitiveness of Japanese beers in the international market. In 2018, it will expand the list of ingredients allowed inside the can. The happoshu stigma will be removed, and taxes will be leveled. It will ultimately mean fast growth for the nation’s craft brewers and good news for craft-beer drinkers.

The Finance Ministry wants to encourage more craft brewing in Japan. It believes more craft brewing could also help revitalize regional economies. And this directly correlates with Prime Minister Shinzo Abe’s development program.

The current, tax regime has caused domestic shipments of all beer to decline for 12, straight years. Revenue is projected to continue falling through 2021, according to Tokyo-based market researcher Fuji Keizai Co.

The current tax regime maybe was a good idea for Japan in the 19th century. It was seen as a way to raise money without putting a tax burden on Japanese consumers. But now, it only hinders the Japanese economy—it must change.

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