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TOKYO - Japanese drinks giant Kirin Holdings on Friday scrapped its troubled beer tie-up with an opaque conglomerate linked to the Myanmar military, which this week staged a coup and in 2017 killed thousands of Rohingya Muslims in a 'genocidal' crackdown.

The abrupt end to the alliance serves as a cautionary tale for other Japanese companies, from Aeon Co to auto-parts maker Denso Corp, whose Myanmar ventures have been thrown into disarray https://www.reuters.com/article/myanmar-politics-japan-companies-idUKL4N2K71YP after the army takeover, experts say.

Human rights monitors have pressured Kirin to end its venture with the Myanmar Economic Holdings Public Company (MEHL) because of its army links. In 2019, the United Nations warned that firms doing business with MEHL aided the army financially and were at "high risk" of contributing to human rights abuses.

The Myanmar army on Monday overthrew the elected government of leader Aung San Suu Kyi, handing power to its top general and declaring a one-year state of emergency, sparking international condemnation and calls for fresh sanctions by the United States.

In 2018, U.N. investigators said the army carried out mass killings and gang rapes of the Rohingya with "genocidal intent" a year earlier and its top brass should be prosecuted for the gravest crimes under international law.

"Given the current circumstances, we have no option but to terminate our current joint-venture partnership with Myanmar Economic Holdings Public Company Limited, which provides the service of welfare fund management for the military," Kirin said in a statement on Friday.

"We will be taking steps as a matter of urgency to put this termination into effect."

MEHL and the joint venture, Myanmar Brewery Ltd (MBL), did not respond to calls seeking comment.

Teppei Kasai of Human Rights Watch said Kirin's move was long-awaited and welcomed.

"Other foreign companies with ties to the Tatmadaw should follow in Kirin's footsteps in an urgent and transparent manner."

Tatmadaw is a Burmese term for the country's armed forces.

UNDER PRESSURE

Kirin acquired a majority stake in Myanmar Brewery in 2015, part of billions of dollars in foreign investment which flooded into the country with the partial lifting of international sanctions. Later that year, Suu Kyi’s party won the first free election in 25 years and has ruled the country of 53 million since then in an uneasy partnership with the military.

Faced with pressure from human rights monitors, Kirin hired third-party investigators to look into the business and said in November it was halting payments from the beer ventures to MEHL. But it had been undecided on how to resolve the issue.

Myanmar accounts for less than 5% of Kirin’s global beer sales, but it is one of the few growing beer markets for Kirin as sales in its home market continues to shrink due to an ageing population.

Bernstein Research said it valued Kirin's stake in the joint venture at $1.4 billion-$1.7 billion.

"However, given the current political climate in Myanmar and the minority partner, any buyer would face material reputational risk ... and Kirin would likely have to accept a discount," said the brokerage in a note issued earlier this week.

Kirin said on Friday it was not necessarily exiting Myanmar.

"We hope to find a way forward that will allow us to continue serving Myanmar and its people in the years to come," it said.

(Reporting by Ritsuko Ando and Antoni Slodkowski in Tokyo; Additional reporting by Reuters staff; Editing by Lincoln Feast.)