Front row, from left
Outside Director
Masato Kitera
Chairman of the Board
Shigeaki Okamoto
Outside Director
Yukiko Uchida
Back row, from left
Deputy Chairman of the Board
Masamichi Terabatake
Outside Director
Kenji Asakura
Fiscal year 2025 marked a period of significant change for the JT Group's management, including a transition in leadership and changes to the business portfolio. The Directors discussed key topics of interest raised through dialogue between Outside Directors and institutional investors. Presented below are excerpts from those discussions.
How does the Board of Directors view the JT Group's business portfolio, and what discussions are being held to enhance corporate value?
Transfer of the pharmaceutical business
TerabatakeIn fiscal year 2025, we made the bold decision to transfer the pharmaceutical business. The business had long contributed to the JT Group's profits through an integrated value chain together with Torii Pharmaceutical Co., Ltd. In recent years, however, it had faced growing uncertainty over its medium- to long-term growth potential within the Group due to factors such as the increasing difficulty of innovative drug discovery, intensifying global competition, and limitations on business activities associated with our position as a company centered on the tobacco business.
At the same time, we believed that, in order to further develop the drug discovery capabilities and expertise cultivated within the JT Group into the future, the business should operate under a pharmaceutical company that recognizes the value of both the pharmaceutical business and Torii Pharmaceutical Co., Ltd., while placing a strong focus on innovative drug discovery. Following extensive discussions at the Board of Directors, we concluded that transferring the business to Shionogi & Co., Ltd., a pharmaceutical company with research and development at its core, was the best course of action.
As part of our corporate responsibility, we believe it is important to provide an environment in which the drug discovery capabilities we have built, together with the people supporting them, can continue to fully demonstrate their expertise. We also believe this will help foster and maintain the trust of our stakeholders. From this perspective, we view the transfer of the pharmaceutical business as a decision that will contribute to enhancing the JT Group's corporate value over the medium- to long-term.
OkamotoLooking back on the changes since JT's establishment in 1985, there are probably few Japanese companies that have undergone a transformation as dramatic as the JT Group. Even though the tobacco business was expected to remain stable in the years immediately following JT's establishment, the Group actively pursued diversification and international expansion. I believe a sense of urgency about the Group's future served as a major driving force behind those efforts.
Discussions regarding the transfer of the pharmaceutical business extended beyond the future of a single business and were approached from a wide range of perspectives with the future of the Group as a whole in mind. At the Board of Directors, we shared an understanding of the situation regarding changes in the business environment surrounding the pharmaceutical business and its future growth potential, which enabled us to reach an appropriate decision regarding the transfer.
Toward the future growth of the JT Group
TerabatakeTo achieve sustainable profit growth over the medium- to long-term, the JT Group's business portfolio consists of the tobacco business, which serves as the core driver of profit growth, and the processed food business, which plays a complementary role in supporting profit growth. In the tobacco business, we position Reduced-Risk Products (RRP) as an important future growth area and plan to invest approximately 800 billion yen over the next three years. In the processed food business, we will leverage the strengths cultivated in Japan while focusing on expanding our core products, including noodles and seasonings, primarily in North America and Southeast Asia, as part of our medium- to long-term growth strategy.
To continue delivering "fulfilling moments," we believe it is essential to continuously evolve the way we provide the value sought by society, guided by the realization of the JT Group Purpose. Through D-LAB, established in 2020, we are expanding our options for sustainable growth through the development of new businesses. Today, we are advancing more than 100 projects globally, some of which have already resulted in commercialized products. In addition, as of May 2026, the number of investments in startups had reached approximately 200. At the Board of Directors, while continuing to monitor the growth trajectory of our existing businesses, we also intend to support the continued growth of D-LAB.
UchidaD-LAB plays an extremely important role as the JT Group looks beyond the tobacco and processed food businesses and considers what its future should look like from a broader perspective. The concept of "fulfilling moments" set forth in the JT Group Purpose is a very broad one, without a single fixed answer. "Fulfilling moments" can mean different things to different people, and the concept itself also varies across countries, cultures, and eras. Precisely because it is such a diverse concept, however, I believe it has the potential to resonate with a wide range of people.
I hope D-LAB will continue to generate business seeds that people can relate to personally and offering perspectives that encourage people to think about the future of society and what "fulfilling moments" means. I would also like to contribute personally to helping advance those efforts.
AsakuraOver the two years since I was appointed as an Outside Director, I have also seen a number of noteworthy initiatives in the tobacco business. For example, in 2024, the Group acquired Vector Group Ltd. in the United States, and more recently, technological development has been advancing rapidly in categories outside combustibles, including not only Heated Products but also Modern Oral and E-Vapor. I believe the continued strengthening of the portfolio̶not only across businesses, but also across regions and product categories within the tobacco business itself̶shows that the groundwork for medium- to long-term growth is being steadily put in place.
At the same time, with respect to future growth areas, including the processed food business and D-LAB, a key issue will be how to chart a path for growth and nurture these areas into future business pillars while taking into account their respective characteristics and time horizons. D-LAB in particular is an initiative aimed at expanding future options from a long-term perspective. Precisely because of this, I believe further discussions will be needed regarding the establishment of KPIs and milestones aligned with the progress of its initiatives, as well as roadmaps toward commercialization.
KiteraIn 2025, together with Mr. Asakura, I participated for the first time in small meetings with institutional investors, where I was able to directly sense the strong interest investors have in the JT Group's business portfolio transformation. Looking ahead, I hope to see the emergence of entirely new types of tobacco products as next-generation products in the tobacco business̶products fundamentally different from conventional cigarettes and Heated Products. At the Board of Directors, we intend to closely monitor the direction of research and development with such possibilities in mind.
In 2025, JT appointed a new president for the first time in eight years. In making such an important management decision, what issues and considerations were discussed by the Board of Directors and the Advisory Panel on Nomination and Compensation in reaching that decision?
OkamotoAt the JT Group, we continuously work to strengthen both the quality and depth of our pool of executive management candidates by identifying and developing individuals who are capable of advancing the Group's management principle, the 4S model, and contributing to enhancement of corporate value over the medium- to long-term. With respect to the decision-making process, candidate proposals formulated by the president are deliberated by the Advisory Panel on Nomination and Compensation, with advice provided by the Outside Directors, before a final decision is made by the Board of Directors.
TerabatakeDuring the process of selecting the next president, I, as the representative director at the time, regularly shared updates with each member of the Advisory Panel on Nomination and Compensation on the status of succession planning, beginning from the stage where multiple candidates were under consideration. Discussions continued as the committee periodically reviewed progress. Once we had gained sufficient visibility on key issues such as the global expansion of RRP and the transfer of the pharmaceutical business, I explained to the committee that I wished to recommend Mr. Tsutsui as the most suitable candidate for the next president. Following deliberation, the committee determined that the recommendation was appropriate, which led to the public announcement last November.
Mr. Tsutsui brings extensive experience in business development, including past M&A initiatives. He was also involved in the launch of D-LAB, and in his previous role, he established the global operating structure for RRP and built a framework for expanding the product pipeline. He also led the development of Ploom AURA, a new Heated Products device, and successfully drove its rollout into global markets. These accomplishments clearly demonstrate both his expertise and leadership capabilities.
From my own experience working with him, one of Mr. Tsutsui's greatest strengths is his strong commitment to innovation and consumer-centricity. He listens carefully and sincerely to consumers, stays close to the front lines of the business, and works tirelessly to implement improvements with a clear determination to deliver results. I believe this relentless drive to create new value is an essential quality for leading and growing the next generation of the JT Group.
Taking these experiences and leadership qualities into account, we concluded that his capabilities are well aligned with the challenges currently facing the JT Group, as well as those we expect to face going forward, and selected him as the next president.
AsakuraMr. Tsutsui has made a strong impression through his active participation in discussions at the Board of Directors. I also sense a strong commitment on his part to maintaining close communication with us Outside Directors through one-on-one meetings and other opportunities for dialogue. Going forward, I expect he will present a variety of new visions as the new president, and I look forward to seeing how those visions are translated into concrete strategies and KPIs.
KiteraThrough my conversations with Mr. Tsutsui, I have come away with the impression that he is an excellent listener. I have high expectations that his strong communication skills will serve as an important foundation for demonstrating leadership as the new president.
As Mr. Okamoto also mentioned, securing the next generation of leadership talent is another important issue for the Board of Directors. We have had opportunities to engage in candid discussions with younger employees who will shape the future of the JT Group through sessions held between Outside Directors and younger employees of the Group. In conducting effective discussions at the Advisory Panel on Nomination and Compensation, I believe that this kind of direct dialogue with future executive management candidates is extremely valuable from a long-term perspective when considering management talent, and I hope we will continue these efforts going forward.
Governance across the JT Group's global operations is also an area of strong interest among institutional investors. How does the Board of Directors view governance across the Group as a whole?
Current state of global governance
TerabatakeSince January 2022, we have unified the operating structures of the domestic and international tobacco businesses under a One Team structure in order to strengthen the management of the tobacco business.
The headquarters functions for the tobacco business, including the Japan market, were integrated into JTI in Switzerland, which serves as the headquarters for the international tobacco business. In addition to the R&D functions that had already been integrated, reporting lines for functions related to the tobacco business, including marketing, sales, manufacturing, leaf procurement, and quality assurance, have also been globally integrated.
At the same time, strengthening governance in line with the One Team structure required us to establish both a robust foundational system and an organizational structure designed to minimize the risk of misconduct. Over the course of two years, we fully integrated the Enterprise Resource Planning (ERP) systems used in Japan and overseas in January 2024. Because we now operate a single global ERP instance and use common operational guidelines worldwide as the basis for decision-making, any decisions made overseas can be fully monitored by JT headquarters in Tokyo. In this way, our governance framework has also been strengthened from systems and infrastructure perspectives.
OkamotoCompared with other Japanese companies, the One Team structure may be considered a unique management model, but it was not established overnight. Through past overseas M&A, the JT Group expanded its business globally and, in the course of operating across more than 130 countries and regions, developed a management framework that respects autonomous decision-making at the local level based on appropriate governance̶in other words, a management approach that empowers local organizations.
Under our rules governing authority and responsibilities, we clearly define responsibilities and decision-making authority related to organizational design and operations, while also establishing approval authority and procedures for important matters. For example, JT provides approvals, as appropriate, for matters such as business plans formulated by JTI, as well as investment proposals exceeding certain thresholds, thereby ensuring appropriate subsidiary governance.
In addition, the current management team includes members with extensive business experience at JTI, and we have adopted a structure under which the president of the Group also serves as president of tobacco business. Under this framework, information is shared with the three directors concurrently serving as executive officers, including the president, in a timely manner. Through this structure, a strong relationship of trust has been fostered between JT's Board of Directors and JTI.
We believe governance is functioning effectively under the current structure. At the same time, amid growing uncertainty in the business environment, we believe it is important to continue engaging in effective discussions aimed at sustainable profit growth and enhancement of corporate value over the medium- to long-term, while continuously considering the form of governance best suited to the future of the JT Group.
KiteraWhat is most important is the awareness of management and the framework for information sharing. At the JT Group, information is promptly shared with the Board of Directors regardless of where issues arise, whether in Japan or overseas. Going forward, I believe it is important for the Board of Directors to maintain a strong awareness of global governance and to continue strengthening it through ongoing information sharing and discussions on a day-to-day basis.
Challenges ahead
TerabatakeGovernance of the tobacco business operates through two channels: involvement through the executive function and involvement through the oversight function. The executive function engages in regular and close communication with the head of JTI's tobacco business, including through in-person discussions, and shares updates with the oversight function on an ongoing basis. At the same time, Outside Directors have expressed a desire for even greater information sharing, and we recognize this as an issue to be addressed going forward. Under Mr. Tsutsui's leadership, we intend to further strengthen direct engagement between the oversight function and JTI.
AsakuraI also believe there is room to further enhance information sharing between JTI and the Outside Directors. The execution function already maintains sufficient communication with JTI, and there are currently no major governance issues. However, as the business environment continues to change rapidly, it is important for Outside Directors to have timely and ongoing visibility into the key issues and risks facing JTI, including information that may be negative for the Group, in order to further strengthen the oversight function. For that reason, as Mr. Terabatake mentioned, I believe we should continue to expand opportunities for information sharing with Outside Directors, not only through meetings of the Board of Directors.
How do you intend to leverage your skills and experience to contribute to the enhancement of corporate value and the JT Group's sustainable growth?
UchidaThe JT Group is a company centered on the tobacco business. However, I think it would be unfortunate if the Group's business activities were viewed in purely binary terms as either personally relevant or irrelevant depending solely on whether someone smokes. I am deeply interested in how the diverse concept of "fulfilling moments" will take shape, as well as how the JT Group will connect that concept to its business activities and articulate a broader vision for the future.
As a Director, I hope to contribute from my own perspective by offering viewpoints and raising questions that may be difficult to recognize from within the organization alone, while supporting the process of cultivating and nurturing the seeds of "fulfilling moments."
KiteraThe JT Group competes intensely with its competitors in markets around the world. Because market characteristics, regulations, and tax systems differ by country and region, I hope we can continue to create an environment globally that enables the Group to operate its businesses more effectively while taking these differences into account. At the Board of Directors as well, I intend to speak up based on my own convictions and fulfill my oversight role to help ensure that the JT Group stays on the right path.
AsakuraI believe the areas where I can contribute most are business transformation and the creation of new businesses. As I mentioned earlier, D-LAB is currently engaged in a wide range of research initiatives. However, as these initiatives progress going forward, I believe there is room for improvement from a business management perspective, including clarifying specific progress indicators such as KPIs and designing roadmaps toward commercialization. While smaller-scale initiatives have already been commercialized the challenge will be how to grow them into the next generation of core businesses and over what kind of time horizon. As an Outside Director, I would like to continue encouraging further discussion and closely monitoring these efforts.
TerabatakeAmong the Directors who do not concurrently serve in executive roles, I am the only one with experience on the execution side within the Company. In that sense, I hope to serve as a bridge between the execution and oversight functions.
Under the new management structure, the immediate mission will be to grow the RRP business. Beyond that, however, the key challenge will be how to shape the business portfolio and enhance the growth potential of the JT Group as a whole.
Going forward, I expect Mr. Tsutsui to present a management vision that reflects his own perspective and looks even further ahead into the future. I intend to fully support those efforts while also ensuring that, should risks or other issues arise, consultations and reviews are initiated at an early stage so that the Board of Directors can engage in thorough discussions.
OkamotoAs I mentioned at the outset, the dramatic transformation of the JT Group was driven by a constant sense of questioning and awareness of uncertainty about what the future might hold for the Company. Because the JT Group is a global company, it is particularly susceptible to the impacts of geopolitical developments and technological innovation. We must always remain highly attuned to changes in the world and continue adapting to them. The foundations for doing so were established during Mr. Terabatake's tenure as president, and going forward, I hope Mr. Tsutsui will continue to further evolve that framework.
By drawing on the expertise of our Outside Directors and ensuring that their perspectives are reflected in the Group's decision-making, we will continue working to strengthen the operation of the Board of Directors.
Integrated Report
2026