JAPAN MAKING BEER CHEAPER, ENCOURAGING BETTER TASTE AND BIZ

In Japan, some 4,600 supermarket goods have increased in price this month as a result of the food and beverage industry's continued costpassing amid a once-in-ageneration inflation surge. But one noteworthy exception is beer.

Due to adjustments made to the nation's tax structure, a 350-milliliter can of beer now costs consumers around 7 yen (5 cents) less than it did in October. Cheaper beer, though, is not a political ruse. Instead, it's a long overdue revision to Japan's complex alcohol tax, which has for years encouraged brewers to prioritize subpar goods.

It might seem odd to reduce taxes on alcohol while many countries are imposing minimum prices or lifting levies, something the World Health Organization says could save thousands of lives a year. But for Japan, this is actually a beneficial change, meant to improve government coffers and the quality of the country's brews. At the same time as the tax on "real" beer is being lowered, the rate is rising for cheaper, lowerquality substitutes that have come to dominate the market over the past three decades.

Coincidentally, this also comes at a crucial time in the country's battle with a deflationary mindset that has sapped its global competitiveness. The government emerged from Covid-19 realising that it's in danger of slipping into a middle-income economy. That was likely on Prime Minister Fumio Kishida's mind when he last week called for "a historical shift from the long-standing cost-cutting economy of the past 30 years." The beer industry exemplifies that penny-pinching attitude and its dangers better than any other.

To understand what's happening, we need to go back to the early 1990s after Japan's economic bubble burst. As customers tightened their purse strings, the country's major brewers began to develop beer alternatives using less malt, taking advantage of how the system taxes the beverage based on the malt content. Anything with less than 67 percent malt fell into a category called happoshu, meaning "bubbly spirits," and was taxed at a far lower rate.