Japan Tobacco Inc. and two global competitors are set to pay C$32.5 billion ($22.6 billion) to settle long-running litigation over tobacco health risks in Canada, ending decades of legal uncertainty.
The settlement, which awaits court approval, involves the Canadian units of Japan Tobacco, Philip Morris International, and British American Tobacco, according to a filing with an Ontario court on February 27. The companies were facing 18 lawsuits related to alleged failures to disclose cigarette health risks.
Japan Tobacco will revise its 2024 earnings to reflect approximately ¥400 billion ($2.66 billion) in loss allowances as sales expenses. The company plans an initial payment of at least ¥170 billion, followed by annual contributions of 70% to 85% of its Canadian subsidiary’s net profits until fulfilling its portion of the settlement.
Despite the financial impact on its record ¥697.2 billion operating profit from last year, Japan Tobacco confirmed it won’t alter dividend payments. Mizuho Securities senior analyst Hiroshi Saji noted the company had previously indicated dividends would remain unchanged regardless of settlement-related losses.
The resolution removes restrictions on the Canadian unit, which had been operating under court supervision since failing to pay a C$1.77 billion damages order in 2019. This grants Japan Tobacco greater financial flexibility for future investments.
The settlement represents Japan Tobacco’s first payment in such cases and significantly reduces the company’s legal exposure in Canada. The tobacco firm, which acquired U.S.-based Vector Group in 2024, still faces litigation in South Africa and Ireland but maintains it follows industry regulations and considers additional major lawsuits unlikely.
