FOR IMMEDIATE RELEASE

Tokyo, September 14, 2006 --- Japan Tobacco Inc. (JT) (TSE: 2914) hosted an event outlining the company's food business on September 5, 2006. Participants were able to enjoy a presentation by JT's Executive Vice President and new President of the food business Mutsuo Iwai, and at the same time, sample some JT products at a food-tasting party held at the site. Mr. Iwai aims for an increase in operating margins from the current 2.3 percent to 3.5 percent or higher by the fiscal year ending March 2009. In order to achieve this, the company will enhance its competitive advantage in various business fields and work to establish greater synergies among them. The company is also aggressively pushing ahead in the area of mergers and acquisitions in order to attain further profitable growth. The company's food business marked 278.3 billion yen in sales in the fiscal year that ended in March 2006, and its operating income represented around 17 percent of the company's consolidated net sales after taxes.

JT has operated its food business for 20 years and has seen drastic growth since its 1998 acquisition of Japan's number one independent beverage vending machine operating company, Unimat Corporation (currently Japan Beverage). This was followed by the acquisition of Asahi Kasei's food division one year later, which has shown steady advances in the field of food technologies regarding frozen foods, seasonings, and bread production including its surrounding technology, establishing strong sales channels in the professional-use market. The company has entered into the next stage of expansion, and aims to enhance its business foundation as an established food manufacturer, by achieving a secured profit.

JT's food business is divided into three categories, the beverage, the processed foods, and the seasonings. The beverage accounts for approximately 66 percent of total food business sales. Its strong flagship coffee brand "Roots" has been increasing market share and currently ranks sixth in Japan's growing canned coffee market. Roots has marked a sales increase of 25 percent from the previous year and its steady growth can be partially attributed to the successful marketing of the brand, in addition to Japan Beverage's strong commitment to increasing sales through the expansion of its already existing sales channels.

The processed foods business includes the production of frozen foods, bakery products, and chilled processed foods, and has two main categories - for commercial products and professional use products. Commercial products represent half of the total processed foods sales. Its ready-to-eat commercial products have shown strong sales since 2003, with an approximate annual growth of 20 percent. The company is emphasizing on its frozen foods business to achieve further expansion in scale of sales.

The seasonings business was established following the acquisition of Asahi Kasei's food division, and has been shifting focus of its strategy to natural extract seasonings produced from ingredients such as kelp, bonito, and pork, from MSG (monosodium glutamate) to meet current consumer demand for natural foods. This endeavor has led to the launch of a promising new seasoning product called "Vertex," which is a natural extract derived from baker's yeast. The company aims to establish competitiveness through this value added natural seasoning.

In order to enhance its competitiveness, the company is focusing on the two main areas, technological improvements, and knowledge management. In the field of food technologies, the company has been making advances in the research of frozen food processing, the HTST (High Temperature Short Time) method, which is used in the disinfection process of canned beverages, and yeast-related technologies which would result in new value-added products. In addition, the company has realized accelerated business growth through several mergers and acquisitions, and has established an R&D center. In order to maximize the use of its knowledge and expertise, the company has established a cross-sectoral knowledge management to ensure its internal expertise is fully exploited.

"Our basic strategy to achieve an operating margin of 3.5 percent or higher will be accomplished by enhancing our competitive advantage in the food business as a whole," said Iwai. "I am confident that we can achieve our objectives with our value-added brands, marketing power and ongoing technological improvements, as well as our efficient knowledge management."

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Japan Tobacco Inc. is the world's third largest international manufacturer of tobacco products. The company manufactures internationally recognized cigarette brands including Camel, Winston, Mild Seven and Salem. Since its privatization in 1985, JT has actively diversified its operations into pharmaceuticals and foods. The company's net sales were JPY 4.637 trillion in the fiscal year ended March 31, 2006.