By Timothy S. Donahue

Top Takeaways:

• Tax advantage at risk: Japan plans to align heated tobacco taxes with cigarettes, potentially adding up to 100 yen per pack.
• Growth may cool: JTI warns higher prices could slow heated tobacco momentum, though it expects the impact to be temporary.
• Ploom gaining ground: JTI’s Ploom grew volumes 38% in 2025, reaching 14.4% share in Japan’s heated tobacco market.

Japan Tobacco International (JTI) warned that a planned tax increase on heated tobacco products (HTPs) in Japan could slow category growth this year, even as the company continues expanding its Ploom device in the world’s largest heated tobacco market.

JTI Chief Financial Officer Vassilis Vovos said the Japanese government’s plan to align heated tobacco taxation with that of traditional cigarettes would eliminate a longstanding pricing advantage.

“Heated tobacco products currently attract a lower tax rate than cigarettes,” Vovos said. The proposed change would result in heated tobacco “being taxed exactly like traditional tobacco,” prompting retail price increases.

“This increase is a significant one, and it could be in the area of 70 to 90 yen,” Vovos said, adding that the impact could reach “100 yen” per pack once Japan’s consumption tax is applied.

Japan has been a global proving ground for heated tobacco products, which heat processed tobacco sticks rather than burn them. The category is dominated by Philip Morris International’s IQOS platform, but JTI has been aggressively expanding its share with its Ploom system.

Ploom’s volumes rose more than 38% in 2025, driven largely by gains in Japan, where the brand reached a 14.4% share of the heated tobacco category, according to the company.

Lower prices relative to combustible cigarettes have been a key driver of heated tobacco adoption in Japan. Vovos cautioned that eliminating the tax differential could slow that momentum.

“Lower pricing has helped increase the appeal of heated tobacco,” he said, warning that the change “could lead to slower growth,” though he characterized any impact as temporary.

JTI said it raised the price of its HTPs by 30 yen in January and plans to implement smaller price increases throughout the year rather than a single large hike, aiming to ease consumer disruption from the tax change.

The broader Japan Tobacco group reported 23.5% growth in adjusted operating profit at constant currency in 2025, supported by higher pricing in traditional tobacco and continued growth in reduced-risk categories, including heated tobacco and vapes.