Philip Morris Korea's IQOS Ru Ya Island IFC store opened in March. (Photo: Philip Morris Korea)
The Philip Morris International (PMI) company has announced that it will raise prices for its tobacco-heating products in response to Japan's planned increase in tobacco taxes. There are also reports in South Korea that suggest tobacco taxes may increase with the introduction of a inflation index system. However, many analysts believe that it is unlikely to be replicated in the short term, like in Japan.
On the 26th, Philip Morris Japan announced that it has applied to the Ministry of Finance for approval to change the retail price of tobacco sticks used with electronic cigarettes such as IQOS and IQOS Illuma.
Effective October 1, price adjustments will be implemented that will affect a total of 49 retail products, including 15 Terrier products, 11 Sentia products, 12 Marlboro Heatsticks, and 11 popular products. The Terrier products will range from 580 Japanese yen (approximately 5,700 South Korean won) to 600 Japanese yen (5,900 South Korean won), while Centia products will range from 530 Japanese yen (approximately 5,200 South Korean won) to 550 Japanese yen (5,400 South Korean won). The Marlboro Heatsticks range from 580 to 600 Japanese yen, while prices for popular products will increase by 20 Japanese yen (approximately 200 South Korean won), rising from 530 Japanese yen to 550 Japanese yen.
This comes as the Japanese Ministry of Finance announced an increase in cigarette taxes. The Ministry plans to raise the tax by 20 yen in three stages, reaching a total of 60 yen (about 600 Korean won). The decision was made with consideration for the financial situation of national and local governments as social security-related costs continue to increase with an aging population. The tax increase is set to be reported in October.
According to a spokesperson from Philip Morris Korea, pricing policies vary by country and there are currently no plans to change prices in South Korea. Industry experts within the country also believe that the recent price increase in Japanese cigarettes is unlikely to have a direct impact on South Korea's inflation index system, but the government has not commented on the issue.
An industry official stated, "The Korea Institute for Health and Social Affairs adheres to a pricing system, but under the administration of Yoon Seok-ryul, there has been no discussion on cigarette taxes.
According to the National Health Promotion Fund's tobacco pricing policy and utilization plan released in May, the Korea Institute for Health and Social Affairs stated that "due to the need for a high level of social consensus for an increase in cigarette prices, actual changes in cigarette prices cannot be reflected. It is necessary to examine the introduction of a price index system with existing price indexes.
Industry experts believe that the introduction of an inflation index system is viewed positively from a business standpoint. This perspective aims to increase predictability in business management. An industry leader expressed, "if a price index system is implemented, for example, if prices increase by 4% this year, it would be beneficial to predict the increase in cigarette tax next year. From a business perspective, predictable numbers are more crucial.
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