Japan: New THC residual limit confirmed. Industry concerns and future outlook

On 11 September 2024, the Official Gazette of Japan announced the effective date of the amendment to the Cannabis Control Act and the confirmed residual limit for THC (tetrahydrocannabinol). Looking back, the residual THC limit proposed by the Ministry of Health, Labour and Welfare (MHLW) on 30 May was remarkably strict compared to international standards, leading to a backlash both domestically and internationally.

Subsequently, the MHLW collected public comments related to the Cannabis Control Act of 30 May on 29 June, seeking public views on the draft regulation under preparation.

Ultimately, most opposing views were ignored and no significant changes were made to the original proposal. This article serves as a continuation of the our previous analysis of the proposed limits, investigating the recently announced residual THC limit and industry reactions to these new measures.

Additionally, we have compiled insights on how these new standards will impact the market and business through interviews with various industry stakeholders.

New THC Residual Limits Shake Up CBD Industry 

The official gazette serves as a means of announcing Japan's laws and important public matters. Recently, the confirmed THC residual limits and enforcement date were set as follows:

• Oils (liquid at room temperature) and powders: 10 ppm (0,001%)
• Aqueous solutions: 0,1 ppm (0,00001%)
• Others: 1 ppm (0,0001%)
• Date of application: December 12th

Source: Ordinance on the application of the law amending parts of the Cannabis Control Act and the Narcotic and Psychotropic Substances Control Act (Official Gazette)

These limits refer to standards set by the European Food Safety Authority (EFSA), which actually adopted values ​​from 2015 onwards, making them incredibly strict compared to current standards in Western countries:

• EU: THC levels must be below 0,3%, with the exception of Italy where the limit is 0,6%
• USA: Federal level allows THC levels below 0,3%
• Switzerland and Czech Republic: allow THC levels below 1%

Despite significant opposition in public comments, only minor adjustments were made to the original proposal, such as changes to the names of the classifications and the limit values ​​for powders.
Previously, CBD products containing 200 ppm (0,02%) THC were circulating on the Japanese market, but these new standards represent a drastic tightening.

Industry reactions to new THC residual limits
The confirmation of THC limits marks a significant turning point for the Japanese CBD industry. While previously ambiguous regulations have been clarified, increasing market transparency and consumer safety, unnecessarily strict standards are expected to pose challenges for many companies.

Indirectly, these changes will also have a profound impact on users who rely on CBD for health maintenance and symptom relief. The Department of Health’s strong stance against cannabis, driven by drug prevention concerns, underlies the refusal to tolerate even small amounts of THC.

In response, many companies will be forced to re-evaluate their product ingredients and manufacturing methods to comply with the new standards. Furthermore, providing consumers with adequate information and education will be crucial to increasing brand credibility.

To gauge industry sentiment, we conducted exclusive interviews with key figures from industry associations, testing organizations, CBD brands, stores, and consulting firms. The feedback revealed a complex mix of outrage and confusion, interspersed with a sense of duty and a never-give-up spirit.

Based on these insights, we will explore how these new THC residual limits will impact the industry and market in the future.

◾️CBD Industry Association Voice: “Nobody Has Ever Tested Limits Like 1 PPM”

Teruyuki Sudo, Representative Director of National Hemp Industry Council, Japan’s first CBD industry association, shared the following insights: “Following the Health Ministry’s announcement of new THC limits on May 30, we held a discussion forum with 228 participants from various companies. However, opinions among members varied significantly, highlighting the urgent need for a unified industry standard, which led to the creation of our association.”

Sudo’s first impression of the new THC limits was, “Nobody has ever tested for limits like 0,1 ppm or 1 ppm.” Concerns are spreading throughout the industry about whether there are enough raw materials that can meet these standards, and whether current products will be able to meet them.
There is likely to be a divide between products that can comply with the new standards and those that cannot, which could narrow the range of products available once implemented. The National Hemp Industry Council plans to work with testing organizations to assess variations in testing and provide evidence-based recommendations to the Department of Health for more realistic THC residual limits. In addition, they aim to establish guidelines and communication channels related to labeling, testing methods, imports, and relevant regulations (such as the Pharmaceutical and Medical Devices Act, the Act Against Unjustifiable Premiums and Misleading Representations, among others) to ensure a healthy industry landscape.

◾️Voices from testing institutions: “Small variations in test results are seen as a serious problem”

Daichi Kouzu, head of Japanese subsidiary of Anresco Laboratories, a pioneering San Francisco-based testing institution founded in 1948, expressed the following: “My first impression is that the established THC residue limit is far from global standards. As a testing institution, we feel the difficulty of complying with this regulation more than anyone else. THC is a component that is present in small quantities in cannabis plants, and no matter how accurately it is removed during the manufacturing process, achieving a complete zero is extremely challenging. Especially when strict standards are set, variations in test results can occur, even within the same batch or product, leading to the possibility of detecting trace amounts of THC. If this slight variation is seen as a problem, the additional costs and risks of product disposal will have a direct impact on the survival of the CBD business. While there is indeed a temporary increase in demand for testing, I also sense a decline in the willingness of domestic and international companies to enter the market, raising concerns about the contraction of the domestic CBD market. We are currently making several evidence-based proposals to the Ministry of Health, Labor and Welfare through the industrial organization “Cannabinoid Testing Liaison Council“, of which we are also members. Specifically, we are suggesting mechanisms such as allowing for small margins of error, considering variations in manufacturing and testing processes, and introducing retesting processes.

◾️CBD Brands’ Voices: “We’re on a Closed Path”

Takuro Hirota, representative of Endoca, a CBD brand founded by Danish researchers in 2013 that also supplies products to medical institutions, said the following: “For brands like ours that emphasize the interaction of cannabinoids known as 'entourage effect'This regulation has had an impact that shakes the very existence of our brand. In the process of completely eliminating THC, there is a risk of losing other effective components, which can significantly reduce the effectiveness of the product. However, diluting the concentration of CBD or switching to isolate products to comply with the regulations contradicts our brand policy. Therefore, prioritizing the quality and effects expected by our customers, we have decided to temporarily suspend our activities as Endoca Japan after December 12th. To be honest, this regulation left us with a strong feeling of 'brand damage'. Although CBD products are widely accepted in the medical and healthcare fields around the world, we have received many questions from overseas manufacturers asking why Japan has adopted regulations that go against this trend. The global market cannot avoid a temporary contraction. However, even during our suspension, we will continue to seek a path to revival.”

◾️CBD Shop Voices: “Absolutely Crazy Regulations. Time to Suck It Up.”

Motoi Hagihara, owner of NSPV, a CBD store that has been selling CBD products in Japan since 2016, said: “Given the Japanese government’s moves and the conservative nature of various industries, I was not surprised by this regulation. To be honest, it was within my expectations, but I still feel a strong sense of disbelief at such crazy decisions that go against the global trend. Of course, the impact on our CBD store is already becoming evident. We have received notices from some manufacturers about withdrawing or discontinuing high-concentration CBD products, making product replacement and reduction inevitable. If our product line consists only of low-concentration CBD, customers who previously relied on our high-concentration CBD products may become dissatisfied, raising concerns about losing users. We have also seen an increase in stories about CBD store closures. Right now, it is a time to resist and prepare for the next step. However, it is not all doom and gloom. Following the announcement of the new regulations, there have been reports of major pharmaceutical companies entering the CBD market. I am hopeful that as awareness of CBD increases, users will have more opportunities to choose products with confidence. When that time comes, only genuine stores will survive. Our store focuses on advisor-style customer service, emphasizing thorough listening, and we will continue to provide guidance on usage that meets our customers’ needs as we navigate this difficult situation.”

◾️Voices from the CBD Community: “Whose Regulations Are These?”

Ryota Nakazawa, representative of “CBD Club”, which operates one of Japan’s largest CBD expos and communities, stated: “In order to protect a healthy market and public health, appropriate regulations are indeed necessary. However, if regulations are too strict, it could lead to an increase in new synthetic cannabinoids and black market transactions, forcing honest businesses to resort to unethical practices. The consequences and chaos that have resulted from previous laws, such as Prohibition in the United States, are clear. With the new THC residue limits, the question remains: ‘Who are these regulations for?’ To promote healthy growth across the CBD industry, it is crucial to strike a balance between regulations and market needs. As ‘CBD Club’, we consider this regulation vital to the survival of the industry. In a few years, we want to look back on this as a proud step. We will advocate for a review of regulatory values ​​with the Ministry of Health, Labor and Welfare, and through workshops and events involving the industry, we will strive to share information and provide support.

◾️CBD Consultants’ Voices: “Implementing a Quality Management System (QMS) is Essential for Sustainable and Healthy Development”

Shinji Ukita, representative of CJC Advisory Network, based in Canada, a country where cannabis is legal, shared the following insights into CBD business consulting: “With current technology, it is perfectly possible to produce products that comply with the new THC residual limits.
However, such strict standards increase the likelihood of reducing effective components, such as cannabinoids and terpenes, during the manufacturing process, including the removal of THC.
Additionally, cannabis contains many other compounds, such as flavonoids and phenols, which can affect the effectiveness of the product. There is a risk that these components may also diminish, potentially weakening the entourage effect – the interaction of multiple components – thus reducing product effectiveness and user appeal. On the positive side, clarifying these regulations can eliminate previously existing legal ambiguities, leading to an increase in large national and international companies and new entrants, as well as advances in the supply chain. The entire industry must focus on sustainable and healthy development.”

◾️CBD users’ reactions to new THC standards

On Change.org, the online petition “Don’t Take Our CBD Away!” is seeing strong backlash among CBD users regarding the new THC limits. Many users are expressing concerns that the regulations will negatively impact their daily lives and treatments. The “Don’t Take Our CBD Away!” petition was launched on June 17, 2024, and continues to gain signatures, surpassing 40.000 in September. At the time of writing, the petition has surpassed 50.000 signatures. Below are excerpts from the comments received:

“Why is this senseless revision (or deterioration) being made? I can only think that truly foolish people are making these decisions.”

“Please do not take away hope from those of us, including myself, who use CBD oil to cope with the suffering of illness. Consider the dignity of life and the implications of changing the law. Thank you.”

“If CBD is said to be dangerous, the health risks from other pharmaceuticals and vaccines are much greater.”

“After struggling with time, money and health issues, I finally found a compliant and effective CBD oil, but having the government imposing regulations now is extremely frustrating for patients undergoing treatment!”

With this tightening of regulations, CBD products that have traditionally been useful will be eliminated from the market, leading to a loss of health options. This is the biggest concern.

◾️Growing withdrawals! Will the projected 65 billion market in 2024 be knocked down?

CBD Products Market Survey (2022): Yano Economic Research Institute

Back in December 2023, when the amendment to the Cannabis Control Act was set in stone, no one in the industry anticipated such strict THC residue limits. Many companies predicted a 0,2-0,3% limit similar to the US and EU, creating a welcoming atmosphere for the amendment. However, once the details were revealed, the confirmed limits were shockingly strict. The CBD industry was projected to grow into a ¥65 billion (yen, or $450 million) market by 2024, but these new regulations have washed away those expectations like a bucket of cold water.
In fact, reports of closures are pouring into the website of the CBD store directory I operate daily. Furthermore, businesses that intend to continue operations are struggling to navigate the opaque situation in which testing methods and designated testing organizations are not specified.

Specific questions arose, such as: “What classification do solid raw materials, such as distillates, fall under?” or “How exactly are liquids and aqueous solutions distinguished?”

With the implementation date approaching and no action plan in place, they find themselves in a state of paralysis. The impact of these regulations on the industry is immeasurable and anxiety and confusion are spreading across the sector.

In short…

The recently confirmed and unrealistically strict THC residual limits will undoubtedly have a serious impact on the Japanese CBD industry. Many companies will struggle to comply with the regulations, leading to withdrawals, closures and reductions. Furthermore, these limits diverge significantly from international standards, posing a risk of isolating Japan from the global market.

On the other hand, the announcement of the new THC residue limits has led to the belated formation of industry associations among CBD operators, who are now beginning to engage seriously with the government. As self-regulation and guideline development in the industry progresses, increased cooperation between companies and evidence-gathering could lead to a review of the limits through dialogue with the government.

Furthermore, clear regulations could encourage entry by large companies and accelerate consumer confidence. Indeed, after the announcement of confirmed THC limits on 18 September, one of Japan’s leading pharmaceutical companies, Taisho Pharmaceutical has launched a CBD product. This move in the midst of the confusion was received with surprise.

Each business operator interviewed expressed hope for the long-term development of the market. They stressed that simply lamenting the situation will not solve the problems and are committed to actively advocating for a review of regulations as they work to advance the Japanese CBD market.

Japan is the fastest-aging country in the world and, due to its serious, image-conscious culture, is often labeled a “stressful nation.”

As the demand for health maintenance continues to increase every year, CBD is being recognized as an effective option. Amidst the intersection of headwinds and potential, the future direction of the Japanese CBD market continues to be a topic of great interest. Japanese CBD companies still do not fully understand the global situation, and on the other hand, the world has limited awareness of the Japanese CBD market. In “CBD Library“, we will continue to provide information that connects these two domains.

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Takuya Aiuchi

Contributor at Japan |  More postsBiography

Takuya Aiuchi is the founder of Japan's leading CBD information platform, "CBD Library". A pioneer in the industry, he contributes articles to domestic and international media on cannabis and participates extensively in international exhibitions. Takuya is actively involved in advancing knowledge and trends regarding CBD and cannabinoids in the Japanese and international markets.

Aiuchi is also a member of the Japan Society of Clinical Cannabinoids and has completed with distinction the courses of Cannabis Consultant MM411, CBD Medical Wellbeing MM411, Qualified Pharmaceutical Affairs Manager, Advanced Functional Food Labeling Specialist and Level 1 Certified Aromatherapy Examiner .

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