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Key Trends for Cannabis in Japan: Law Amendments and New Opportunities in CBD Market

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Euromonitor International’s latest research in 2023 reveals a staggering growth in the Japan’s cannabis market over the past four years, expanding approximately sixfold from JPY4 billion (USD26.3 million) in 2019 to JPY24 billion (USD173.8 million) in 2023. This surge is attributed to the rising demand for products offering relaxation, sleep improvement, and stress relief.

According to an article published by Euromonitor International in 2022, investment and entry into the cannabis market by major Japanese companies has not been aggressive due to legal uncertainty until now, along with the negative image surrounding its use. However, in 2023, the Cannabis Control Law was amended for the first time in 75 years. This amendment is expected to significantly change the potential and accelerate the use of cannabidiol (CBD) in diverse fields, including medicine, health, beauty, beverages and edibles in Japan.

Japan’s legal reform in 75 years amid a rising illicit cannabis use

In Japan, where cannabis has been prohibited since the end of World War II, a groundbreaking legal reform occurred in 2023 amid a backdrop of rising illicit cannabis use

Source: Euromonitor International

While Euromonitor International estimates that 0.12% of the Japanese population are consumers who use illicit cannabis at least once a year, which shows a low figure compared to Western countries, Japan witnessed a surge in illegal cultivation and smuggling operations, particularly among younger generations. Despite the long-standing legal framework, the domestic illicit cannabis market in 2023 was estimated to be 2.5 times larger than the legal CBD market.Chart showing Number of Illicit Cannabis Users in Japan, 2019-2023

The momentum for regulatory change in Japan gained traction due to the relaxation of cannabis regulations in other countries, prompting the Ministry of Health, Labour and Welfare to establish an expert panel to review the Cannabis Control Law in 2021. Subsequently, in 2023, the Cabinet made the landmark decision to amend the law for the first time in 75 years, aiming to address regulatory gaps surrounding the legal market expansion and combat illicit cannabis use.

The amendments are mainly twofold: strengthening regulations, and lifting the ban on the use of cannabis-derived medical products

First, unlike CBD, which is a legal ingredient that can be imported and sold if it is produced overseas, THC, one of the main components of cannabis, will continue to be regulated as a narcotic. In addition to authorised cultivation, the sale and possession of cannabis, which have been punishable up until now, will incur stiffer penalties. Conversely, the government's decision to permit the practical use of Epidiolex, a CBD-based antiepileptic medication, signals a significant shift in policy. Additionally, hemp cultivation, previously restricted to fiber and seed collection or specific purposes, is now authorized for medical use.

This legislative amendment is expected to bring clarity to the regulatory landscape surrounding CBD use in Japan, thereby facilitating the broader development of the industry.

Legal market expected to emerge amidst growing CBD awareness

CBD market has been growing rapidly recently, but is still in its early stages.

CBD products remain relatively unknown to most consumers, with limited understanding and adoption

Source: Euromonitor International

Concerns over product safety and regulatory compliance persist, highlighted by incidents such as illnesses linked to CBD-infused gummies containing HHCH which are reported widely in the nation in 2023, prompting tighter regulations.

The revision of the Cannabis Control Law is expected to usher in clearer guidelines for CBD product sales and distribution, attracting major companies from various sectors to enter the market by 2024. Despite challenges in ensuring quality, complying with regulations, and educating consumers, CBD sales are projected to outpace the illicit cannabis market by 2026, driven by increasing health and wellness awareness among consumers seeking alternatives to traditional products like cigarettes and alcohol.Chart showing Japan Cannabis Market Breakdown (RSP value), 2023

Chart showing Japan Cannabis Market Breakdown (RSP value), 2026Future prospects of Japan’s CBD market

The year 2023 marked a pivotal moment for cannabis in Japan, signaling a potential turning point for the country's CBD market. Recent legal reforms have opened doors for further CBD establishment and development, with the sector gaining attention as a high-growth industry. The increasing utilization of CBD across various sectors, including health, beauty, beverages, and edibles, is expected to reshape societal perceptions of CBD and cannabis. Nonetheless, lingering concerns persist among Japanese consumers, fueled by reports of health issues linked to CBD products. Key to the market's success will be companies' ability to educate consumers about the benefits of CBD products, emphasizing compliance, quality control, and scientific evidence.

Learn more about market data and insight and in our report, Cannabis in Japan.

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