IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERSBusiness Plan 2023

Every year the JT Group publishes a three-year rolling business plan, reflecting the changing operating
environment, including economic trends, geopolitical risks and the competitive landscape.
Business Plan 2023 covers the three years from 2023 to 2025.
We will achieve sustainable profit growth by investing in our businesses, maximally leveraging ourresources on a Group-wide scale and transforming ourselves even in a drastically changing operating
environment.

Roles and targets of each businessTobacco business

Strategy of tobaccobusinessPharmaceutical business

The outlook of our business environment remains unpredictable due to geopolitical risk and related inflation, economic
stagnation and other negative factors in the world economy,
surges in costs, tax hikes worldwide under governmental
policies to secure funds, tightening regulations and increasing bureaucratic complexity.

• We project continuing drug price reductions in both domestic and overseas markets due to the worldwide trend
toward price optimization.

RRP (Reduced-Risk Products)•W e are projecting market-scale expansion in this category,especially the market for HTS (heated tobacco sticks).
•D evice procurement in accordance with our 2023 plan
will be possible despite tight supplies of semiconductors
worldwide.
• Intensifying competition and tighter regulations in leading
markets worldwide.
Combustibles•P rojected to remain the largest category despite the downward trend in industry volumes, due mainly to HTS demand
growth, illicit transactions pressure on consumers disposable income and continuing downtrading.
• The profit pool remains likely to expand through pricing
opportunities.

• Higher return on investment in combustibles• Enhanced investment in RRP• Pursuit of higher operational efficiency• Evolving global business capabilities
4Please see Tobacco business (P. 56) for details.

Operating environment outlook 2023-2025
Tobacco businessOur tobacco operations, the core driver of Group profit growth, are working towards sustainable profit growth through the medium and long terms.

Pharmaceutical business/
Processed food business• T he Group projects a gradual decrease in royalty income
related to anti-HIV drugs.

 ur pharmaceutical and processed food operations are focused on complementing GroupOprofit growth.
• Pharmaceutical business: Focus on R&D investment for next-generation strategic products, and maximizing the value of each product• Processed food business: Realize high-margin top-line growth in an environment with growing operational costs
4Please see Pharmaceutical business (P. 70) and Processed food business (P. 74) for details.

Processed food business• Markets are expected to expand, due to diversified needs,
including easier cooking that takes less time, along withchanges in lifestyles.
• T hese factors on the context of international commodity
prices and exchange rates on costs for materials, as well as
the effects of surging personnel and distribution costs due
to labor shortages.

Resource allocation policy
Resource allocation policy
based on the 4S modeland JT Group Purpose• Work to enhance shareholder returns by realizing medium- and long-term goals for profit
growth while maintaining a strong financial base*2• Target a dividend payout ratio of about 75%,*3 a competitive level*4 in capital markets• Consider implementing a share buy-back program, mainly taking into account theGroup’s financial outlook of the respective year and medium-term capital needs

4Please see Message from the CFO (P. 50) for details.

Group profit target• Prioritize investments*1 for sustainable profit growth in the medium and long terms• Prioritize balance between profit growth through investment and shareholder returns

Shareholder return
policy*1 Grow adjusted operating profit at constant currency by placing top priority on growth-oriented
investment in the tobacco business, while realizing high-quality top-line growth through continuing
provision of new value and satisfaction to consumers and society*2 The Group will maintain a strong financial base that secures stability in case of changes in businessenvironment such as economic crises and flexibility enabling expeditious responses to business
investment opportunities*3 To be in the range of approximately ±5%*4 We monitor the shareholder return trends of Fast-Moving Consumer Goods companies which have astakeholder model similar to our 4S model and have realized strong business growth
4Please see Message from the CFO (P. 50) for details.

Mid- to long-term target

Mid to high single digit annual average adjusted operating profit growth rate at constant currency.

Prospects during the businessWe project low single digit average annual growth, although RRP investment will accelerate.
plan period048

Japan Tobacco Inc. Integrated Report 2022

Japan Tobacco Inc. Integrated Report 2022049