Japan’s Crackdown on Cannabis and CBD Throws a Booming Market Into Uncertainty

Japan’s budding CBD industry may be about to lose its high.

The Japanese government passed a series of revisions late last year to its once-murky narcotics laws, and as proposals for eventual implementation of those reforms are hashed out, questions loom over what the changes will mean for the country’s flourishing—and until now freewheeling—industry of cannabis-derived products.

According to several draft regulations, which were unveiled last month and are undergoing public consultation until June 29, to enforce some of the latest amendments to the Cannabis Control Act, the government plans to severely restrict how much THC—the psychoactive element in cannabis—legal CBD products can contain.

While regulating THC limits for hemp and CBD products is common practice around the world—it’s capped at 0.3% in some U.S. states, for example—Japan’s proposed new cap of 0.001% for oils (and even lower for beverages and products in other forms) has been slammed by advocates and experts as unrealistic and likely a death knell for Japan’s CBD industry, effectively banning the substance altogether, as some regional neighbors like China have recently moved to do.

Read More: CBD Tends to Perplex Regulators. Hong Kong’s New Ban Reinforces Asia’s Strict Drug Approach

“If this goes through, I would say … 90% of the businesses will go out of business,” Toshiki Inoue, the founder of cannabis brand Chillaxy, tells TIME, adding that “close to none” of the CBD products being sold in Japan will be able to adhere to the 0.001% THC limit.

The proposed rules could go into effect as early as October, and the potential dramatic shift has rattled players in Japan’s rapidly growing CBD industry, which has grown sixfold between 2019 and 2023 from a market size of 4 billion yen to 24 billion yen (more than $150 million).

Amid growing public discourse around the uses of CBD in Japan, lawmakers passed reforms late last year that promised to tighten rules on recreational cannabis—including closing a loophole that previously permitted consumption to punish it the same as possession (seven years imprisonment, among the harshest in the world)—while, at the same time, moved to legalize cannabis-derived medicines, regulate CBD products, and facilitate domestic cultivation of cannabis.

Advocates and observers were initially optimistic that the introduction of formal regulations for CBD products would help open up the medical cannabis market and allow the industry to operate with more legitimacy. But when authorities published in late May the details of how they plan to implement the amendments, including the proposed strict THC limits for CBD products, such hopes were dashed.

The ensuing backlash has extended even beyond Japan, with international experts arguing that it would be near impossible to safely manufacture a CBD product with such a low level of THC.

“THC will be present in at least trace amounts in most cannabis-derived preparations that can be safely utilized in consumer products,” Ethan Russo, a U.S.-based medical cannabis expert, wrote in a letter to the Japanese labor ministry, shared publicly by Japanese cannabis legalization advocacy group Green Zone Japan.

Others point out that it would be much more difficult for existing equipment to detect such small amounts of THC during screening processes. “It’s very difficult for most of the laboratories to meet the standard in a stable way. Many laboratories might cheat,” says Roger Nakazawa, the CEO of cannabis company Asabis and one of the industry’s most prominent advocates.

“I wouldn’t say it should be free without any rules. We should set some rules, of course,” he tells TIME. “But if we make it too strict,” he cautions, “the black market will be bigger,” in which “nobody can control the quality, and it will affect public health.”

Read More: What Prohibition Can Teach About Drug and Alcohol Policy Today

Such concerns have already been rippling among people who have been using CBD to alleviate their medical conditions. Experts say that Japan’s explicit legalization of cannabis-derived medicines will likely only apply to highly-regulated pharmaceuticals for extreme cases, such as the drug Epidiolex that’s used to treat severe forms of epilepsy. But a group of people who use recreational CBD products for conditions ranging from cancer to chronic pain have started a petition to protest the proposed THC limits, claiming that it would seriously affect their quality of life. 

Meanwhile, Inoue and Nakazawa remain cautiously optimistic that, with heated opposition coming from these different corners, authorities will revise the initial regulations they’ve suggested to impose on CBD products.

“I want to make people or politicians understand the potential of this market,” says Nakazawa, “and also use it the right way.”