Over the past two decades, Japanese whisky has seen an almost unrivalled rise in popularity in the key whisky markets of Europe and North America. This growing interest, while propelling the Japanese industry to new heights, has led to long-term availability issues for some of the nation’s most respected distilleries as demand far outstripped supply of mature whisky – creating opportunities for new players to step into a sector that, for most of its century-long history, has existed almost exclusively to serve the country’s domestic market with reasonably priced blends.

This growing mainstream success outside of Japan, compounded by a general lack of availability and corresponding increases in retail and resale prices, has led to the entire Japanese category coming under greater scrutiny than ever before. The result: a maelstrom of confusion for Japanese whisky consumers, which has been fuelled by a number of regulatory, cultural and historic production differences between Japan and other whisky-producing nations.

What's the problem?

The first stumbling point comes from the Japanese whisky industry’s culture, which has a strong emphasis on blending and using whiskies from around the world to create flavour profiles that would not be available to them using only whiskies made at the country’s own distilleries. This practice has been happening for a long time and, although never intended to deceive, has certainly made consumers question what might be in their bottle.

More confusion stems from certain exploitative brands taking this to new extremes by importing whiskies in bulk from other countries (mostly Scotland or Canada) which are then bottled and labelled as Japanese. Other instances have seen wily exporters being creative in their use of loopholes in outside markets. This is most widely seen in the United States, where aged shōchū (a distillate typically derived from rice, buckwheat, and/or barley) is often sold as Japanese whisky to unknowing consumers. Grain-based shōchū can be sold as whisky in the US due a loophole in TTB regulations, but doesn’t meet regulatory definitions of ‘whisky’ in either Japan or Europe. While these products are currently breaking no laws, they are seen as being against the spirit of whisky making in Japan. All of this has led to a growing concern for the reputation of whisky coming out of Japan and has led to calls for regulation before irreparable damage is done to the entire Japanese whisky category.

Why can shōchū be sold as whisky in the US but not in Europe?

Understanding this loophole requires a close reading of the TTB designations of whisky in the United States and the EU's spirits regulations document.

'Spirits distilled from a fermented mash of grain at less than 95% alcohol by volume (190 proof) having the taste, aroma and characteristics generally attributed to whisky and bottled at not less than 40% alcohol by volume (80 proof)' — General Class Definition of whisky from the TTB regulations

'...distillation of a mash made from malted cereals, with or without whole grains of unmalted cereals, which has been: — saccharified by the diastase of the malt contained therein, with or without other natural enzymes...' — Excerpt from the EU regulations

Did you spot the difference? The EU regulations specifically state that the mash must contain malted cereals and those cereals must be
saccharified (the process of starches being broken down into sugars) by the enzymes present within the malt itself. You are free to add additional enzymes, but the enzymes within the malt must be doing some of the work. Meanwhile, the TTB rules make no reference to how the grains are saccharified.

In shōchū production, even when barley is used as part of the mash the starches within the grains are not converted into sugars by activating internal enzymes via malting. Instead, shōchū producers add a type of mould (Aspergillus oryzae) to a batch of 'starter grains' to create something known as koji. As this mould grows, it secretes its own enzymes (over 50 of them) which converts starches within the grains into sugars. Thus, the enzymes within the barley are not being activated or doing any of the work.

Because US regulations do not stipulate the source of enzymes for saccharification, this means shōchū made from grains (such as barley, but also including rice) can legally be sold as whisky in the United States. This only one of a number of key differences between whisky and shōchū — the two are very distinct spirit categories.

New Japanese labelling standards for whisky

Producers have now acted and some of the most important players within the industry have presented the first set of labelling standards to be applied to the Japanese whisky sector. As of 1 April 2021, the Japan Spirits & Liqueurs Makers Association (JSLMA) has announced that its members will be ensuring that any whisky products they are producing will meet the new labelling standards that they have put together. While broadly in line with other sets of whisky regulations from around the world, there are some interesting distinctions within the new rules. The inclusion of ‘wooden’ casks as opposed to oak would allow for Japanese whisky makers to experiment with a greater variety of casks than those enjoyed by Scottish or American distilleries. While these new standards are essentially voluntary and only apply to the members of the JSLMA, it is hoped that they will be the first step in helping to create a deeper confidence for consumers when purchasing Japanese whisky.



The labelling standards announcement has been generally welcomed by all sectors within the industry, but there are those that feel more could be done. Dawn Davies, head buyer for the Speciality Drinks Group, which includes retailer The Whisky Exchange, has been advocating for some sort of Japanese whisky regulation for at least the past two years. She explained that, more now than ever, consumers demand a certain transparency from the brands that they engage with. She said: “I truly believe, in this day and age, that the consumer wants traceability, they want to know what they are drinking, they want to know what is in their bottles and they don’t want to be lied to.”

Davies feels that, now the Japanese whisky industry has pushed forward with these new standards, it is on buyers like her to own it and make sure they know where the liquid is from before offering it to the consumer. “The one problem with this legislation is that you follow if you want to follow it, or if you’re part of the group,” she continued. While pointing out that the new rules can only go so far to protect consumers, she contends that legislation which offers customers a known minimum standard can only be of benefit to any category: “Champagne is one of the most powerful brands in the world and that’s all based around legislation.”

Klaus Pinkernell, owner of Pinkernell’s Whisky Market in Berlin and Salzburg, also thought it was about time for Japan to bring in some form of regulation. He believes that, for the most part, the new regulations won’t affect most of his customers as they are generally looking for less expensive Japanese whisky and won’t mind if it is blended with malts made elsewhere. He thinks that it will mostly be high-end consumers and investors that will be actively seeking ‘the real thing’ when it comes to Japanese whisky.

Chris Seale, managing director for Speciality Brands – importer for Nikka’s range of products in the UK – also believes that there is work to be done when it comes to educating consumers on what they are drinking. Whilst welcoming the new steps being taken by the JSLMA, he argues that more needs to be done to help consumers make an informed choice in the first place. “I think consumers are largely in the dark and they need a lot of help in deciphering the information or lack of information that’s out there,” he said, explaining that while the new regulations will play a part in helping to clarify the category, they can’t be the be all and end all. “We assume that consumers have a higher level of knowledge than they necessarily have,” he continues, making it clear he feels that this is something the industry has to try and change, especially now that they’ve seen a spike in sales of Japanese whisky products since the regulations were announced.

James Bowker, UK ambassador for Suntory, agrees and has made clear his personal feeling that it was a fantastic first step for Japanese whisky. “I hope that we will see things continue to move forward in terms of regulations around quality, provenance and production,” he said, adding that it’s not just Japan that needs to take measures to protect the whiskies being produced there – export markets must also enforce consistent regulations to protect consumers.

While believing that transparency is key to the future success of Japanese whisky, Jota Tanaka, master blender at Fuji Gotemba Distillery, says there is still a place for what he calls the ‘world blends’ – often made with spirits sourced from abroad in styles unavailable to blenders in Japan.

“Blending imported and domestic whiskies has long been our industry’s practice and is part of the history, tradition and culture of Japanese whisky making. In recent years, under the name of ‘innovation’ such products have been released overseas as well,” said Tanaka. He explained that Japan’s ‘world blends’ did not come about due to stock shortages; they were created to offer as wide a range of flavour profiles as possible to Japanese consumers.

He acknowledges that provenance is a growing concern for consumers but hopes the concept of ‘world blend’ is acceptable as long as transparency is ensured. “We are moving in the right direction and this step will help to ensure a promising future for our industry,” he concludes.

A new era begins

With the regulations taking hold from 1 April and the grace period for selling existing non-compliant bottles ending on 31 March 2024, exactly how these new regulations will affect the global whisky industry is still unknown. Scotch distillers, already feeling the squeeze from Brexit, could see their bulk sales to Japan affected if consumers shun brands using Scotch in their make-up. We might also see export markets such as the US face pressure to shore up their own regulations to stop the sale of non-conforming spirits. In the short term, however, the standards can only bring clarity to a category which, for invested whisky consumers and the trade, has long been mired in confusion.

Summary of new Japanese regulations

To be labelled as ‘Japanese whisky’ or ‘Japanese whiskey’, a product must conform to the following criteria:

• Raw ingredients being used must be limited to malted grains and other cereal grains
• Malted grains must always be used
• All water used must be extracted in Japan
• Saccharification, fermentation, and distillation must be carried out at a distillery in Japan
• Alcohol content at the time of distillation must be less than 95% ABV
• Distillate must be matured for a minimum of three years in wooden casks not exceeding 700 litres in size
• Bottling must take place in Japan, with an alcoholic strength of at least 40% ABV
• The use of plain caramel colouring (E150a) is permitted

[Adapted from Standards for Labeling Japanese Whisky, Established February 12, 2021. Japan Spirits & Liqueurs Makers Association.
English translation.]


Clarification
When this article originally published in issue #175, we received feedback that the original wording of the following segment was ambiguous regarding whether potato-based shōchū could be sold as whisky in the United States. This is not the case and the article above has been updated to make this clearer.