Japan was using a 200 point rating scale to determine who the lucky underwriters would be for the sales of the government’s shares in JT, Japan Tobacco. The company used to be entirely state owned. Tobacco is a major industry in Japan, though its users are decreasing in number. Tobacco was a state owned industry until 1985, the notion probably unfathomable to Americans acquainted with the Surgeon General 1965 decree and the subsequent slow decline in smoking. Currently, the state is down to owning half of Japan Tobacco. But it’s fitting that Japan is looking to decrease that amount to 1/3, if only for its desire to repair infrastructure in the wake of last year’s earthquake and tsunami. Additionally, if only as a public health issue, it’s time that Japan as a government slowly exits stage left on Tobacco. It’s not a very good example for its citizens, who make up one of the largest tobacco markets in the world. Smoking rates have dropped, but are still about 10% higher for men and women relative to the current rates in the United States.

The companies that were picked for the underwriting of the shares were Daiwa and Mizuho domestically, and the Japanese portions of JP Morgan and Goldman Sachs for overseas investors. The government claims that it was not swayed by the insider trading scandal that Nomura experienced with connection to Tokyo Electric Power Co., but it likely played a factor. Interestingly, JPMorgan and Mizuho were first timers in Japanese government share sales. For Japan, that may have been an indication that they’d be more compliant, being less familiar to the game and thus expecting less control over the deal. It’s possible that Nomura’s familiarity with the process was the exact reason why Japan kept their hands off the deal. Nomura also just announced earlier this month their culpability in the insider trading matter, and Japan’s decision followed only shortly after. If Nomura was punished by regulators, that would disqualify them from underwriting the deal, which would be a big problem if the process was already underway.

Despite financial insiders concerns about the economic particularities of the deal, the most important thing is the changing trend of Japan’s exit from Tobacco. For any country, a significant portion of their relationship with their citizens should be related to public health. While Japan’s busy selling their shares off, they should realize that an even greater long term economic imperative is ensuring that their citizens are healthy. That 1/3 stake should eventually be shaved down to zero as soon as the country can possibly manage. Sick people are expensive for a country in many aspects. Japan is still dwarfed by China’s consumption of cigarettes, but that doesn’t mean they don’t have a problem, and an immediate one at that.

This article was written by Jennifer Nobles. Jen is a promoter of good business and solid financial advice. She believe that strong finances, possibly with the help of a Financial  Advisor, can help people tremendously and smart investing is the real path to securing a fruitful and stable future.

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