Japan Tobacco loses control of Russian units to state management

Japan Tobacco Inc. lost direct control of four manufacturing subsidiaries in Russia when President Vladimir Putin issued an order placing them under the temporary management of a local Russian firm. The Japanese government reacted swiftly to the decree, which effectively transfers operational authority of the cigarette maker’s Russian assets to a state-aligned entity. This action marks a sharp escalation in the economic friction between the two nations.

The dispute builds on a pattern of rising tensions that began in August of this year. At that time, Putin visited Iturup, one of the four Kuril Islands currently controlled by Russia but claimed by Tokyo. The visit occurred against the backdrop of a longstanding territorial disagreement stemming from the Soviet seizure of the islands at the end of World War II. That territorial issue has historically blocked the signing of a formal peace treaty between the two countries.

Diplomatic friction intensified in mid-October following the arrest of a Japanese journalist from a Hokkaido newspaper on suspicion of spying. Tokyo demanded an explanation, consular access, and humane treatment for the detainee. In late October, Japanese consulate officials met with the journalist and confirmed he remained in good health, a development that slightly cooled the immediate diplomatic temperature before the new corporate dispute emerged.

On Friday, Chief Cabinet Secretary Minoru Kihara briefed reporters on the government's response to the Japan Tobacco move. He confirmed that senior government officials traveled to Moscow to join the Japanese ambassador in lodging a formal protest. The delegation demanded that Russia withdraw the measure immediately to ensure the legitimate interests of Japanese nationals and businesses are not violated.

Economy and Trade Minister Ryosei Akazawa noted that the Japan Tobacco case follows a growing number of instances since September in which Russia has placed assets of Western companies under temporary Russian control. Akazawa described Japan's approach as cautious, stating that the government will continue communicating with Moscow to protect the assets of Japanese firms.

Japan Tobacco stated it is gathering more information and assessing the potential impact of the order on the group. Finance Minister Satsuki Katayama, whose ministry holds a 37.55% stake in the tobacco company, said she plans to cooperate closely with relevant ministries and Japan Tobacco while watching the development.

The Japanese government is now coordinating its response across multiple ministries to address the loss of control over the subsidiary operations. The immediate focus is on maintaining communication channels with the Russian government while evaluating the long-term operational implications for the Japanese firm.