Japan: Cannabis market increased sixfold between 2019 and 2023 to 145 million euros, says Euromonitor report

Um report Euromonitor International's 2023 report reveals a remarkable expansion in Japan's cannabis market, with growth from 4 billion yen (24,2 million euros) in 2019 to 24 billion yen (145,2 million euros) in 2023, six times more. This increase was largely driven by growing demand for CBD products, which offer “relaxation, improved sleep and stress relief” and CBD sales are predicted to overtake the illicit cannabis market by 2026 if regulation is implemented. favorable to the development of this market.

According to a previous Euromonitor International report from 2022, major Japanese companies have been cautious about entering the cannabis market due to legal uncertainties and the negative stigma still associated with its use. But 2023 brought historic change, with the Cannabis Control Act amended for the first time in 75 years. This significant reform was set to accelerate the use of cannabidiol (CBD) in various sectors including medicine, health, beauty, beverages and edibles in Japan.

However, on May 30, 2024, a seismic shock hit the Japanese CBD industry. In response to the revision of the Cannabis Control Law, the Ministry of Health, Labor and Welfare proposed a new THC (tetrahydrocannabinol) residual limit of 0,0001%, which has faced strong reactions, both nationally and internationally. This proposed limit is significantly stricter than international standards, potentially shaking the foundation of Japan's CBD business.

Among the advances and setbacks regulatory standards, the cannabis industry, specifically hemp and CBD, has grown substantially in recent years and this Euromonitor report proves it.

Increase in illicit cannabis consumption amid legal changes

Despite some legal advances, Japan has seen an increase in illicit cannabis use. Euromonitor International estimates that 0,12% of the Japanese population consumes illegal cannabis annually, a relatively low figure compared to Western countries. However, there has been a notable increase in illegal cultivation and smuggling, especially among younger generations. By 2023, the illicit cannabis market was estimated to be 2,5 times larger than the legal CBD market.

The global trend towards easing cannabis regulations led Japan's Ministry of Health, Labor and Welfare to create an expert panel to review the Cannabis Control Law in 2021. In 2023, the Council of Ministers decided changing the law, filling regulatory gaps and combating illicit cannabis consumption.

Distinction between CBD and THC in the new regulations

The amended law maintains strict regulations on THC, a primary psychotropic component of cannabis, treating it as a narcotic. Although the authorized cultivation and possession of cannabis is subject to more severe penalties, the legal status of CBD has been clarified. In particular, the government approved the use of Epidiolex, an anti-epileptic medicine based on CBD, and authorized the cultivation of hemp for medicinal purposes, which was previously restricted to the collection of fibers and seeds.

Emerging legal market and growing awareness of CBD

The CBD market in Japan has seen rapid growth, but remains in its initial phase and threatens to make the use of flowers unviable due to strong restrictions on THC limits. Concerns about product safety and regulatory compliance persist, highlighted by incidents such as illnesses linked to CBD-infused gummies containing HHCH (hexahydrocannabihexol) in 2023. These incidents have led to stricter regulation.

Despite challenges related to quality control, regulatory compliance and consumer education, CBD sales are expected to overtake the illicit cannabis market by 2026.

This growth is driven by growing awareness of health and well-being among consumers looking for alternatives to traditional products such as cigarettes and alcohol.

The revised Cannabis Control Law is expected to provide clearer guidelines for the sale and distribution of CBD products, attracting large companies from various sectors to enter the market by the end of 2024, the report says.

Japan CBD Market Future Outlook

The year 2023 marked a pivotal moment for Japan's CBD market. Recent legal reforms have opened up new opportunities for the establishment and development of CBD, positioning the sector as a high-growth industry. The increasing use of CBD in health, beauty, beverages and edibles is expected to transform society's perceptions of CBD and cannabis. However, concerns persist among Japanese consumers, fueled by reports of health problems linked to CBD products and the government's intentions to mandate nearly impossible THC limits.

For the market to be successful, government regulatory hurdles must first be overcome, and then companies must focus on educating consumers about the benefits of CBD, placing an emphasis on compliance, quality control and scientific evidence. This will be crucial to building trust and promoting a positive image of CBD products in Japan.

Japan's cannabis market is on the cusp of a significant transformation. Legal reforms and growing consumer interest in health and wellness products have significantly boosted the growth of the CBD industry. As the market evolves, continued efforts to ensure product safety, regulatory compliance and consumer education will be vital in shaping the future of the Japanese CBD market.