The Japanese government has stated it will withhold on selling its 50% stake in Japan Tobacco as a result of next month’s Lower House elections and a turbulent market. As Japan Tobacco controls nearly two-thirds of the country’s cigarette market, the government is looking to reduce its ownership to around 33% in order to raise over 500 billion yen (approx. $6.15 billion) to fund the reconstruction budget after last year’s earthquake and tsunami disasters.
As a result of the sale delay, Japan Tobacco’s share increased by over 7% in the Tokyo stock trade on Monday, closing the day at 2,411 yen ($29.68), or 6.53% higher. The withholding of the government’s sale is of little concern to Japan Tobacco, which owns the brands Camel, Winston, and Benson & Hedges. The corporation was made aware of the government’s decision, and is still prepared to buy back the shares when the time is right.
Next month’s general election is almost assured to see a change in power, and with that new adjustments. In addition, there is a pending decision on whether to raise Japan’s cigarette taxes next year, as well as the overall global economic slow down. Combined, this creates a choppy stock market which must be taken into account when timing large stake sales.
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