Almost every culture has a long and rich drinking culture, followed by rules and protocols to regulate consumption in the name of controlling order and society. Japan is no exception. While sake is said to be connected to the mythological origin story of the country, there have been countless taxes and regulations placed on it throughout history — some of which still exist today.

And the back-and-forth between overregulation and the promotion of Japan’s national beverage has left many Japanese citizens confused about how to approach sake. While U.S. and global sake consumption is rising, it has been trending downward in its home country. Let’s explore the reasons why.

What falls under Japanese liquor laws

In Japan, alcohol is defined as any beverage or powder with 1% alcohol (alcohol for non-drinking purposes, like medical use, falls under a separate category). Sake — formally, “seishu” (清酒) — is a rice-based fermented alcohol whose ABV is between 1%-22%.

There are differences in taxes according to the ABV, and the tax rates have changed many times over the last few decades.

Most recently, in 2022, the government plans to gradually introduce new taxes to lower the tax on beer and sake and raise taxes on low-malt beers, wine and chuhai (cocktail drinks under 12% ABV).

Here’s a rundown of the taxes per 350 milliliters.

A brief history of sake

The birth of sake predates recorded history, so there’s fuzzy evidence of its exact origins, though it is thought that it occurred as early as 300 B.C. Several ancient texts allude to an unspecified type of rice-based alcohol, such as “Nihon Shoki,” the historical document of the birth of Japan; “Kojiki,” the classic mythology text; and the first-century Chinese text “Lunheng.”

Sake brewing evolved into a sophisticated art as an offering to the gods and was consumed within the Imperial Court. (Born “Chogin” by Katoukichibee Shouten became a court favorite during the Showa period.) But over time, sake production became large-scale and more accessible to the commoners. It gradually came to be enjoyed as an everyday drink, not just reserved for special occasions or the upper class.

Japan’s Prohibition and taxation on breweries

As the sake industry flourished and sake breweries gained economic power, the Kamakura shogunate (1185-1333) issued a ban on sake production, citing that excessive drinking would harm society. But much like Prohibition would be in early 20th-century America, this proved unsurprisingly unpopular, so the Kyoto Imperial Court imposed a tax in exchange for permitting the operation of liquor stores. Called “Tsubosen” (壺銭) or “Shuzoyaku” (酒造役), it is considered to be the oldest form of taxation on liquor stores in Japan.

During the following Muromachi shogunate (1336-1573), the government used this tax revenue to strengthen its military. The Muromachi era was a time of civil wars, so this income provided financial support and maintained the government’s political dominance as it dealt with rampant samurai and peasant uprisings.

Edo period rules and regulations

As Japan entered a new era of peace and isolationism, also known as the Edo period (1603-1868), there were several concerted improvements to produce sake on a more industrial scale with higher quality.

Until the early Edo period, breweries would brew sake year-round. But sake produced during the warmer months was prone to spoilage, as the sake would ferment too quickly. On the other hand, the sake brewed during the winter was highly prized and expensive due to its consistent and quality flavors.

“Kanzukuri” (寒造り, “cold production”) took place between December and February, when breweries took advantage of the cold and dry climate, which made it easier to control the temperature of the “moromi” (sake mash) and avoid bacterial contamination. It’s a technique that predates modern technological advances in temperature control and air filtration.

The Tokugawa shogunate of the Edo period enacted regulations on sake production to prevent wasting precious rice, to control the price of rice, and to avoid sake going rancid. It banned brewing other than kanzukuri, which then became the mainstream method.

Heavy taxation and the banning of homebrew

Like the Muromachi shogunate, the Meiji government, which spurred the country to rapid modernization and westernization, sought tax income to build its military strength and economy. Around 40% of funds for the Imperial Japanese Army came from liquor taxes, which is said to have helped the Japanese win the First Sino-Japanese War (1894-1895) and Russo-Japanese War (1904-1905).

The government did not initially impose a tax on beer and wine to encourage people to consume Western liquors as part of the government’s westernization agenda. Some say this was one reason for the rapid diffusion of beer among the Japanese.

Around this time, commercial sake accounted for about 30% of domestic tax revenue, but homebrewing was unaccounted for, and “doburoku” (濁酒, “cloudy sake”) makers were exempted from taxation. However, the government tightened its control over sake production, restricting and banning homebrewing in hopes that it would increase revenue. This law prohibited the popular doburoku, a cloudy, unfiltered, low-alcohol concoction that farmers and families would brew and drink after the rice planting and festivals.

But homebrewed doburoku never disappeared, as regulated sake was expensive for many, so a secret underground doburoku market thrived. After WWII, sake became relatively cheap due to economic democratization easing rice restrictions, and it mostly disappeared from the Japanese drinking culture.

However, it made headlines in 1986 when a man named Toshihiko Maeda was prosecuted for violating the Liquor Tax Act for making doburoku and other types of sake without a license. He argued that it was his constitutional right to pursue happiness and, therefore, could brew doburoku as part of Japanese food culture. Ultimately, the Japanese Supreme Court ruled against him, but his book on homebrewing doburoku became a bestseller.

While it seems like doburoku has faded into the backdrop of sake culture, there is also a movement to revive it. As the Japanese government does not categorize it as sake, obtaining a license is much easier than producing actual sake. This has birthed new microbreweries specializing in doburoku.

Tippsy also carries Niwa no Uguisu “Doburoku” by Yamaguchi Brewing Company. It’s perfectly legal in the U.S., although it is categorized as “Other” on the site because it is not categorized as seishu in Japan.

Taxation and sake categorization

The government was not the only one guilty of manipulating alcohol taxation for its benefit. Breweries also gamed the system, forcing the government to reform the law to keep up.

One taxation was based on the volume of “genshu” (undiluted sake) produced by breweries. Called “Zoukokuzei” (造石税), the government taxed breweries based on how much sake the breweries produced before sales. With rice rationing during the war periods in the 1930s, breweries diluted their genshu to produce a higher yield and maximize their profits. Nicknamed “kingyo-sake” (金魚酒, “goldfish sake”), the running joke was that the sake was often so diluted that goldfish could live in it. This practice was cut short with the reformation of the law based on the total volume of sake sold.

“Kyubetsu-seido,” the classification system of 1943, established new taxation based on sake grade — high taxes for high-grade sake. It was simple: at the top was “tokkyu” (special class), followed by “ikkyu” (first class) and “nikyu” (second class). For consumers, the idea was that they could easily identify a good bottle from a bad one by checking its grade.

To receive the grading, breweries would send samples of their sake to be graded by a special agency within the government. However, this gave an unfair advantage to bigger breweries that could pay higher taxes and refine their sake to receive higher marks. Sake producers making premium sake but unable to pay the high taxes were automatically slapped with a nikyu label for the lack of grading.

Ichinokura of Miyagi prefecture was a famous rebel brewery that refused to send samples for grading. Their longtime seller, Ichinokura “Mukansa” 一ノ蔵 無鑑査 (“no-audit sake”), is still available today. It’s said that these local breweries with a nikyu label gave rise to the “jizake” (local craft sake) boom.

This grading system disregarded the actual quality and characteristics of sake and was abolished in 1992. It gave birth to the current-day classifications based on “seimaibuai” (rice polishing ratio), with categories like ginjo, daiginjo, junmai, and more.

While the current-day categorization is much more complex than kyubetsu-seido, it has allowed a greater diversity of sake to flourish.

The legacy of liquor laws today

The law on homebrewing is still in effect, even though alcohol tax makes up less than 3% of revenue and the Japanese Self-Defence Force, under the Ministry of Defence, is funded by taxpayer money.

So what about homemade fruit infusions such as “umeshu” (plum wine)? Umeshu is made by infusing ume (Japanese plums) and sugar in alcohol for a few months to years. According to Japanese liquor laws, you can make umeshu at home if you use distilled alcohol over 20% ABV and intend to drink it at home. Due to the low possibility of fermentation in a 20% ABV environment, homemade umeshu made with white liquor is allowed.

However, the law bans making umeshu with sake, mirin, or alcohol under 20%. It is illegal to homebrew over 1% alcohol by volume, and you may be fined up to 1 million yen (roughly $7,600) or 10 years in jail if caught (although, it’s not like the Tax Agency goes door to door conducting home raids).

This law also extends to brewing beer at home (hence, beer brewing kits are illegal in Japan) and sangria. Sangria, the wine cocktail with macerated fruits, is usually left for two to three days for the flavors to meld. But due to the possibility of the fruits fermenting in the wine, it is illegal unless the fruits and wine are served immediately after combining.

Cocktails are not banned as it is a combination of taxed alcohol and will not create new types of alcohol in the process.

Moving forward

Many factors have contributed to sake’s decline in Japan, including the convoluted history of tax laws, a rapidly decreasing population, the younger generation’s lack of interest, COVID restrictions on serving alcohol at restaurants and bars, long-term health concerns and the stagnant economy creating fewer stable jobs for youths.

Japan collected about 1.1 trillion yen from liquor sales tax, or around 2% of total tax revenue in fiscal 2020, down 13% from 2016. The volume of alcohol taxed has steadily shrunk to 7.7 billion liters as of 2020, down nearly 10% from a decade ago, and the numbers for alcohol consumption have fallen from 100 liters in 1995 to 75 liters in 2022.

While the government tried to spur the industry with ill-fated campaigns such as “Sake Viva!” to increase drinking among Japan’s youth, it sent a mixed message on prioritizing the declining alcohol industry and expanding the government’s tax income over the new reality that young people simply cannot or choose not to drink as much as older generations. It also contradicts the Japanese health ministry’s mission to prevent alcoholism and improve the public health of its citizens.

However, sake culture is blossoming outside Japan, thanks to curious drinkers and companies sharing the love of sake, like Tippsy. Many sake breweries have turned their attention to the growing overseas market, from international competitions and events to the popularity of Japanese restaurants and food culture. While sake won’t completely disappear from Japanese culture altogether, it is evolving and adapting to the needs of 21st-century drinkers.

Resources:

Japan Sake and Shochu Makers Association. “A Comprehensive Guide to Japanese Sake.”
National Research Institute of Brewing, 2011.
https://www.nrib.go.jp/English/sake/pdf/guidesse01.pdf

Rath, Eric C. “Doburoku: From Illicit Homebrew to Legal Microbrew.” SAKETIMES, 2022.
https://en.sake-times.com/deep-dive/doburoku-from-illicit-homebrew-to-legal-microbrew

Dr. Koizumi Takeo. “Sake and Japanese Culture.” NIPPONIA, 2008.
https://web-japan.org/nipponia/nipponia44/en/feature/feature01.html

“The Story of Sake.” The National Research Institute of Brewing, 2014.
https://www.nrib.go.jp/English/sake/pdf/SakeNo01_en.pdf

“Is it wrong to say that the former premium sake = daiginjo sake? What is the “grading system” that determines the rank of sake?” SAKETIMES, 2020.
https://jp.sake-times.com/knowledge/word/sake_g_word_the-sake-grading-system

“An Easy-To-Understand Explanation of the History of Sake.” Sakesen, 2021.
https://www.sakesen.com/blog/history-of-sake/

“When did sake originate? Let’s unravel the history of sake culture.” Sawanotsuru Co, Ltd., 2020.
https://www.sawanotsuru.co.jp/site/nihonshu-columm/knowledge/history-of-nihonshu/