Beer Tax Puts Brewers in a Froth

TOKYO -- The cans of cheap beer crammed on the shelves of Shingo Matsubara's liquor shop look harmless enough.

But in recent weeks they have sparked rows in Japan's corridors of power, sent its $40 billion-a-year brewery industry into crisis mode and even opened a rift between the wildly popular prime minister and his son.

To the consternation of brewers, Japan's revenue-thirsty bureaucrats want to raise taxes on a well-loved low-malt beer known as happoshu.

That would give the government a welcome income boost as it tries to shore up the country's wobbly finances, but brewers say it would also cripple demand for their star product, which is currently taxed at around half the rate of normal beer.

The proposed tax hike is upsetting the nation's beer drinkers who have been enthusiastically guzzling the stuff in recent years, reflecting the "cheaper-is-better" philosophy accompanying Japan's slide into recession.

"The politicians see an easy way to get money, and they just want to grab it," said the 57-year-old Matsubara, frowning behind the counter of his family-run shop in a well-to-do part of downtown Tokyo.

"If they raise the tax, our sales are sure to go down, and the customers will hate it. With the economy in this state, happoshu is one of the few sources of happiness around."

Beer connoisseurs say happoshu has a taste slightly inferior to the real thing but that refinements in its ingredients in recent years have narrowed the gap.

A crucial point is that it gets you just as drunk as real beer -- and often more so, as many happoshu varieties have a higher alcohol content than normal brews.

"People have gotten used to the taste, but the main reason they drink it is the price," said Matsubara, pointing to labels showing a difference of nearly 100 yen (80 cents) between 500-milliliter cans of happoshu and ordinary beer.

Most of that gap is tax, which explains why brewers are terrified that their most promising market could be wiped out at the stroke of a pen.

Since its introduction in 1994, sales of happoshu have exploded to account for nearly 30 percent of Japan's total beer consumption, providing a rare bright spot for brewers and the slumping economy.

But success has come at a cost. The attention of the tax man at a time when the pressure is on from Prime Minister Junichiro Koizumi to rein in the massive debts the country has run up in recent years.

The tax mandarins say that happoshu has become so tasty that there is precious little difference between it and normal beer, and thus it should be taxed at the same rate.

"They now taste the same, there's very little difference," Hiromitsu Ishi, chief of the government's tax panel, said in a recent interview. "It's a loophole, and we need to fill the gap."

The sums of money involved are not small froth. The Japanese are the world's fifth-biggest beer drinkers, helping the government rake in around 1.8 trillion yen ($14.7 billion) in alcohol-related revenue each year. The tax men reckon that raising the duty on happoshu could net them upwards of 250 billion yen in extra money next fiscal year, going some way towards plugging an expected revenue shortfall.

But the nation's beer makers and drinkers are not taking this lying down.

The five big brewers -- Asahi Breweries Ltd., Kirin Brewery Co. Ltd., Sapporo Breweries Ltd. plus unlisted Suntory Ltd. and Orion Breweries Ltd. -- have set up a pressure group to oppose the increase and make their case.

Looking to rally the public, the group even has its own web site, www.happoshu.com, which invites disgruntled drinkers to e-mail their views directly to the prime minister or the ruling Liberal Democratic Party. The beer makers won the first round of the battle last year, when their friends in the LDP succeeded in getting the plan ditched.

The brewers also have a not-so-secret weapon in the shape of Koizumi's eldest son, Kotaro. The youthful scion of the prime minister has been plugging Suntory's low-calorie "diet" happoshu in television commercials in his debut role as a television talent.

His status as the happoshu poster boy has put him on a side of the debate opposite his dad, a fact that Japan's media have gleefully picked up on.

"It's tasty and makes you slimmer!" beams the aspiring actor in one commercial, trying to persuade a reluctant older man to drink the beer.

"That's too good to be true," replies the man.

"Well, we're setting new standards," proclaims Koizumi, in an echo of his father's promise to change the normal way of doing things.