Philip Morris cancels planned cigarette price hikes in Japan+

TOKYO, April 15 Kyodo - Philip Morris Japan KK has decided to cancel its planned cigarette retail price hikes in Japan for fear of seeing a further fall in sales, a Finance Ministry official said Thursday.

The retail price of a pack of Marlboro and all other cigarette brands of the
company was scheduled to be raised by 20 yen from June 1 after gaining approval
in March from the ministry, which oversees the tobacco industry in Japan.
The official said, ''I believe this is the first case in Japan that a tobacco
company has withdrawn a plan to raise cigarette prices after obtaining
permission from the government.''
Philip Morris, the second-largest seller of tobacco in Japan, told the ministry
on Monday it wants to call off the plan to raise the prices and the ministry
has accepted the request, the official said.
The company changed its policy after its market research showed the possibility
of a bigger-than-expected drop in sales if the hikes were implemented,
according to the official.
''We have decided to forgo the hikes after considering various factors,'' a
Philip Morris spokesperson in Tokyo said. ''We cannot comment on our pricing
strategy.''
A month ago, its smaller rival British American Tobacco Japan Ltd. withdrew its
application filed with the ministry to raise the prices of its cigarette
brands, citing the need to cope with the changing market environment.
In February, Philip Morris asked the ministry for permission to raise prices
for the first time since July 2006 to make up for declining sales in the
market.
Had the changes been realized, a pack of 20 Marlboro cigarettes would cost 340
yen ($3.60).
The ministry official said Phillip Morris's cancellation was not desirable as
the price hikes were once announced and that could have led some consumers to
stock up on its cigarettes.
The ministry has instructed the company to publicize the policy change as best
it can so as to prevent confusion.
Regardless of the cancellations, cigarette prices in Japan will move higher in
any case as the government has decided to raise the tobacco tax by 3.5 yen per
cigarette starting Oct. 1.
Japan Tobacco Inc., which has the largest domestic market share at about 65
percent, has predicted that the tax hike will cause about a 20 percent plunge
in overall tobacco demand.
Japan's tobacco sales fell for the 10th straight year in fiscal 2008. Industry
officials said the data for fiscal 2009, due out this month, are likely to show
a continued year-on-year decline.
==Kyodo