Liquor

March 2003

The Ministry of Finance (MOF) has decided to eliminate the minimum production requirement for home-brewed alcohol in special deregulation zones, but maintain the restrictions on the type of alcohol that can be produced. The MOF's deregulation framework for home-brewed alcohol, produced and sold by low-budget inns managed by farmers and other entities, is part of the government's overall structural reform initiative that uses special zones to test deregulation proposals submitted by municipalities. The framework will be included in the revised special deregulation zone legislation to be submitted to the Diet in mid-March. Current regulations require each manufacturing facility to secure a license from the tax authorities for each type of alcohol produced. Home-brewed alcohol is categorized as miscellaneous alcohol, which has a 6,000-liter production minimum before a license can be granted. The minimum, which makes market entry for new producers difficult, will be eliminated exclusively in the special deregulation zones. However, the type of alcohol that can be produced will be restricted, effectively banning its sale outside of the special deregulation zones. Production of unfiltered products within the miscellaneous category using rice, malted rice and water as ingredients will be permitted. These products continue to ferment after production, unlike filtered, refined sake, making it difficult to bottle, ship and market them outside the special zones. If they want to produce alcohol that can be marketed more widely, special zones should not be used, but they should outsource production to an established manufacturer. This explains the restriction on the type of alcohol that can be produced. For other special deregulation zones, no special tax breaks will be granted. Alcohol products are divided into 10 categories, each with its own tax rate. Home-brewed products with a standard alcohol level will be taxed at 104 yen per liter under the new tax rates taking effect in May. The tax is paid monthly by alcohol beverage manufacturers according to the amount shipped. (March 3, the Nihon Keizai Shimbun)