Japan is very well-known for its sake, and more recently, for its excellent whisky, but Japanese craft beer is starting to make its mark as well. Hitachino Nest has been enjoying a cult following in the US for some time now and other Japanese craft breweries are becoming recognized and appreciated by beer aficionados all over the world. These are exciting times as the beer industry in Japan has gone through a somewhat tumultuous history; the production of high quality, craft beer is changing things up in Japan’s long traditional of alcohol production.Early History of Beer Production in JapanBeer came to Japan in the early 17th century during the Edo Period via Dutch traders who opened a beer hall in Nagasaki for sailors working the Japan-Dutch Empire trade route. During the late 1800’s, the companies that would later become some of the biggest Japanese breweries were established, including Kirin, Sapporo, and Asahi (though they had different names at the time). In the late 19th century, beer in Japan was very heavily influenced by Germany as Japan imported German ingredients and manpower to establish the industry during this time. It’s for this reason that German-style lager still makes up 95% of the current domestic beer market. By the turn of the century, there were around 70 operational breweries, but in 1901, a new beer tax wiped many of them out. Thanks to the sake industry, which was much larger than beer, taxes on alcohol produced about a third of all tax revenue before World War II. It was during this time that the government decided to ban homebrewing to increase alcohol sales, thus increasing tax revenue. Technically, you still can’t homebrew anything stronger than 1% alcohol by volume in Japan today.After World War IIIt was World War II that separated Japan’s beer culture from its German roots and Japanese brewers were on their own. Japanese beer shifted towards a lighter and less hoppy flavor profile as a result of ingredient shortages and rationing. By 1959, beer overtook sake as Japan’s most consumed alcohol for the first time. In 1987, the light and crisp Asahi Super Dry was released, which sparked the “Dry Ways” - an intense competition for market share among the four major breweries of Asahi, Kirin, Sapporo, and Suntory. At this time, all four brewed very similar beers - the light, crisp style that Japanese beer is known for. Asahi came out on top, overtaking Kirin as the market leader by 2001.Lowered Beer Production MinimumThings in the beer industry were gradually starting to change and in 1994, the Finance Ministry decided to lower the beer production minimum. This is what kept the barriers so high for newcomers who wanted to compete in the game. And it wasn't due to a movement spearheaded by beer enthusiasts; rather, this ruling was made because of an internal licensing decision where more brewing licenses would mean more revenue. Beer production requirements dropped from 2 million liters to 60,000 liters. Smaller breweries began to pop up in Japan producing what they called ji-biiru, which means regional or local beer.The first wave of ji-biiru came onto the market and within 5 years, there were about 300 microbreweries; however, not all of them were good. Despite the enthusiasm, there was a general lack of brewing expertise and a general lack of beer knowledge amongst consumers. Huge companies still dominated the market and although some smaller breweries survived, many failed and the number of microbreweries dropped steadily toward the approximate 200 that are operating today. It was a hostile market and many restaurants and bars weren’t ready or able to take on the risk of using these new products, especially since the big breweries were actively trying to push craft brewers out.The Rise of Craft BeerThings did eventually improve for smaller breweries and the ones that survived honed their skills, gained more experience, and started to produce better products. At the same time, distributors and restaurant/bar owners helped develop the market and educate both consumers and brewers. The term ji-biiru was increasingly traded for “craft beer” and international interest in Japanese microbreweries started to grow.The Future of Craft Beer in JapanBeer and beer-like products called happoshu (made with lower levels of malts) is currently the most popular alcoholic drink in Japan. Craft beer may only have 1-2% of the domestic market share, but the industry is continuing to develop. It faces many challenges, though. Japan has one of the highest beer taxes in the world and this continues to restrict profit for microbreweries. Japan also lacks a long-standing beer and brewing culture that other countries have. The law that prohibits homebrewing is also seen as a barrier to some, as homebrewing is what has driven a lot of innovation in American craft beer culture. Some special brews with exotic ingredients that are expensive to produce must be advertised as happoshu, which is seen as a beer knockoff and has a stigma attached to it. This is because these recipes don’t meet regulators’ official definition of beer, which "must" have at least 67% malt content. And of course, there’s the competition from the cartel of big brewers.On the other hand, starting in 2020, the Finance Ministry plans to change the tax rates for beer and happoshu in order to boost the competitiveness of Japanese beers in the international market. In 2018, it also plans to expand the list of ingredients allowed inside the can, allowing brewers to advertise certain special brews as beer and not happoshu. With systematic support like this combined with the growth of craft beer culture and knowledge, the future looks bright for the Japanese craft beer scene, which has already made major strides in two short decades. This new craft beer culture may very well continue to grow and match the craftsmanship and quality we typically associate with Japanese food and beverage.