Tobacco Companies Brace for Tax Increase

NEW YORK (TheStreet) -- International tobacco companies have inched lower as they brace for a major tax increase on cigarettes in Japan.

Philip Morris International(PM) stock has lost 0.4% at $50.10 and British American Tobacco(BTI) has declined 0.7% at $63.40.

Japan is set to announce its biggest ever tax increase on cigarettes -- in a nation in which 40% of the male population smokes and cigarettes sell for 300 yen or $3.39 a pack -- according the Wall Street Journal. A pack of cigarettes in New York City can cost more than $10.

Smoking rates among the male population in Japan are projected to fall to about 27% if cigarette prices are raised by even 200 yen, according to Japan's Health Ministry -- bad news for cigarette companies with market share in the lucrative, $38 billion Japan tobacco market.

Yet this could also end up being a false scare for tobacco companies. At the beginning of the month, shares of cigarette companies jumped after a news report detailed a smaller-than-expected tax increase on tobacco products in Japan and a hike that was less than the Health Ministry had been pushing for.

Japan rakes in about $11 billion in revenue a year from taxes on tobacco products. Altria(ALG), which owns Philip Morris USA, is up 0.4% at $19.70 and US cigarette manufacturer Lorillard(LO) has added 0.8% at $70.30.

-- Reported by Andrea Tse in New York >>See our new stock quote page.

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