Russian President Putin ordered the temporary takeover of the Japanese tobacco company's assets in Russia, which sparked strong reactions from the Japanese government. On November 6th local time, Japan officially protested to Russia, demanding that the relevant decision be immediately revoked.
The Japanese government is the largest shareholder of the Japan Tobacco Company, holding more than one-third of its shares. Russia is an important overseas market for this tobacco giant, contributing about a quarter of its adjusted operating profits.
On November 5th, Putin signed a presidential decree transferring the temporary management of four Russian subsidiaries of Japan Tobacco (abbreviated as JT) to Russian domestic companies. This move took place during periods of tense relations between Russia and Japan, and is seen as a signal from Moscow to further pressure Tokyo.
According to Presidential Decree No. 817 published on the Russian official legal information website, the affected companies include JTI Don River Tobacco Company, JTI Yelyetsi Company, and two other companies, involved in cigarette production and tobacco raw material processing businesses.
The presidential decree appoints the Russian company “Industrial Assets” as the temporary manager. The measures take effect from the date of announcement; no specific reasons are mentioned in the document.
According to current Russian regulations, temporary management does not mean that ownership of assets is transferred immediately, but foreign enterprises will lose their actual control over related assets.
According to Japanese media reports on November 6th, Japan's Finance Minister Katsumi Baisho stated that Japan had protested against the presidential decree signed by Putin with Russia, and demanded that Russia immediately lift the relevant measures.
Japanese Minister of Economy, Trade and Industry, Ryutaro Akazawa, stated at a press conference on that day that Japan had protested to the Russian government, demanding the rapid revocation of the relevant decision.
Akizawa emphasized that the Japanese government has been in constant communication with the Russian side regarding the protection of its companies' assets in Russia. It is particularly necessary to take action this time.
The Japanese Foreign Ministry also took diplomatic action. Yukio Nakamura, Director-General of the European Bureau of the Japanese Foreign Ministry, protested to Russian Ambassador to Japan Nozdeylov on the 6th, demanding that the Russian side revoke the related decision.
Meanwhile, Yoshihiro Kimura, the Chief Cabinet Secretary of Japan, revealed at a press conference that senior officials from the Economic, Trade and Industry Ministry and the Foreign Affairs Ministry, who are currently visiting Russia, have jointly protested with the Japanese ambassador to Russia to the Russian government, demanding the immediate removal of the temporary measures. Kimura stated that the Japanese government will continue to closely monitor the developments and take appropriate measures.
Regarding the Russian decision, the Japanese tobacco company responded by stating that it has taken note of the relevant presidential decree and is currently evaluating the specific situation as well as possible measures to be taken in the future.
The company emphasizes placing the interests of employees and other stakeholders first. Once it is determined that there are significant matters that need to be disclosed to the public, announcements will be made in a timely manner.
Russia has quickly triggered reactions in the capital markets.
On the evening of November 5th, the stock price of Japan Tobacco Company plummeted by 19% during post-market trading, hitting a low of 6,269 yen. On November 6th, the company’s stock price continued to face pressure.
Nippon Tobacco has been operating in the Russian market for many years. Its international department entered Russia in 1999, and expanded its local operations further in 2007.
The company will account for 37% of the Russian tobacco market in 2025, ranking first in the market. The Russian market contributes approximately 10% of the company's total sales and about one-fourth of its adjusted operating profits.
According to previous predictions by the company, the proportion of Russian operations in overall business will remain basically unchanged in 2026.
This means that if the Russian side continues to maintain temporary management measures, Japan Tobacco will face the risk of losing control over its operations in important overseas markets, and its future earnings may also be significantly affected.
It is also worth noting that the Japanese government itself is a major shareholder of the Japan Tobacco Company.
As of the end of June this year, the Japanese Minister of Finance held 37.55% of the company’s shares. This has led the Japanese government to face not only the need to deal with the Russian decision from a diplomatic perspective, but also the issue of how its holding of the company's shares may affect the business interests of the company itself.
Russia has taken these measures at a time when relations between Russia and Japan continue to deteriorate.
Since the outbreak of the Russia-Ukraine conflict in 2022, Japan has followed the United States and European countries in imposing multiple sanctions against Russia, and has continued to provide assistance to Ukraine. Moscow has repeatedly criticized Tokyo for its so-called "hostile" policies.
On October 2nd this year, the Japanese government announced a new round of sanctions against Russia. Specifically, Japan imposed restrictions on 35 ships that are considered part of Russia’s "shadow fleet". In principle, Japan prohibited the provision of services such as operation, maintenance, insurance, and financing to these ships.
Three days later, Russian Foreign Ministry spokeswoman Zakhareva commented on the Russian Ministry of Foreign Affairs website, warning that Russia would take reciprocal measures against Japan's unfriendly actions.
Zaharova emphasized that Russia's countermeasures will first target those areas where Japan has significant interests.
After that, the friction between Russia and Japan continued to increase.
In October this year, the Russian Ministry of Foreign Affairs expressed strong dissatisfaction with a Japanese company's sale of drones to Ukraine. It deemed this action hostile and warned that severe consequences would be imposed.
In the same month, Russian security authorities detained a Japanese journalist from the Hokkaido Shimbun on suspicion of espionage activities. The Japanese side denied the accusations and demanded that the Russian journalist be released.
The territorial disputes between Russia and Japan over the Kola Islands (referred to as the "Northern Four Islands" by Japan) have further strained bilateral relations.
In this context, the temporary takeover of Japan Tobacco's assets in Russia has been seen by Japanese media as a move by Russia to further pressure Japan.
However, the Russian side has not clearly stated whether this decision is directed against a specific Japanese policy recently.
In April 2023, Putin signed a presidential decree establishing a temporary management mechanism for foreign assets. According to the regulations, if Russian overseas assets are seized or related property rights are restricted, Russia can take corresponding measures regarding the assets of so-called “unfriendly countries” in Russia.
In the same year, the assets of French dairy company Danone and Danish beer company Carlsberg in Russia were temporarily taken over. The related assets were later sold to Russian buyers.
In September this year, Russian assets of Swiss food giant Nestle, German wholesaler Metro, and French retailer Herschel Leyland were also placed under temporary management. In October, the Russian side implemented similar measures against several European companies.
Putin said last month that Russia took these measures in response to European countries’ seizure of Russian assets.
Russia has indicated that foreign enterprises likely will retain the ability to control relevant assets in the future, despite being affected.
For Japan Tobacco, it remains uncertain whether they will be able to regain control of their operations in the future. For the Japanese government, this incident also means that the ongoing strained relations between Russia and Japan are causing even more direct impacts on the overseas interests of Japanese companies.
