Japanese Auto Market Takes Sales Hit As Consumption Tax Increases

Cameron Aubernon
by Cameron Aubernon
japanese auto market takes sales hit as consumption tax increases

The Japanese auto market took a hit in sales last month, falling 5.5 percent to 345,226 units as an increased consumption tax of 8 percent took hold in a sign of a slow year in sales.

Bloomberg reports the drop comes at the end of a seven-month-long sales surge of over 783,000 vehicles through March 2014 ahead of the levy issued by Prime Minister Shinzo Abe to help fight the ongoing financial issues plaguing Japan for two decades. As a result, economists believe Q2 2014 will see the biggest retraction since the 2011 Tōhoku earthquake and tsunami.

As for the outgoing month, Toyota and Mazda both posted their lowest number of deliveries since 2011, while Subaru saw a 41 percent drop to a record low number. Meanwhile, Nissan, Suzuki and Mitsubishi all saw gains in April, with Mitsubishi taking the biggest slice of the market at 27 percent.

The consumption tax will be mitigated somewhat for automotive consumers through a 5 percent vehicle-purchase tax, and will give way in 2015 for a 10 percent national sales tax. In the meantime, the next year could play out like it had in 1997, when the tax jumped from 3 percent to 5 percent and auto sales dropped 15 percent with a 21-month decline in the industry.

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  • Corey Lewis Corey Lewis on May 02, 2014

    I thought there was a Flex sitting in front of the Spike for a second, and I was going to be happy. Course I also read the plate on the Honda as "SPIKO" first, but that'd be offensive.

  • RHD RHD on May 02, 2014

    Caption: "Mommy, why do you always park the car so funny?"

  • FormerFF FormerFF on May 02, 2014

    Sales off by 41%? No love for Subaru in that market, apparently. Japan is a densely populated place with excellent public transportation. Its population is both aging and shrinking. I don't see how car sales can do anything but decline in the long term.

    • Inside Looking Out Inside Looking Out on May 03, 2014

      Don't worry - US will compensate generously for lost sales in Japan unless US goes Japan way which is already happening (0% interest rate that lasts decades (6 years and counting in US). I wonder when Japanese big three will finally move their headquarters to US since it is the only country in the world that cares for Japanese cars.

  • Jeff S Jeff S on May 04, 2014

    Japan has been in an economic slump for over 20 years. If anything Japan should lower the consumption tax. A major problem Japan has that a majority of their population has aged with fewer younger people. Closed immigration and lower birth rates means less workers and thus less taxes which puts a further strain on the taxpayers. For the most part Honda, Toyota, Sony, and other large Japanese corporations are producing most of their products outside of Japan. Toyota and Honda are becoming more US corporations, especially with Toyota consolidating their NA operations in Plano, TX. This is good for the US.

    • Big Al from Oz Big Al from Oz on May 04, 2014

      @Jeff S Yes, the Japanese will have to do something to change the trajectory of their economy, Abe can only do so much. The only way for the Japanese is to tax, as you stated there are less and less to pay for the social welfare and to run the country as well. Japan is where many OECD economies will be in the near future. The average Japanese citizen is cashed up with investments, etc. This money is what is keeping Japan afloat. If Japan fails, the Japanese will lose this. The US still has the capacity to allow for immigration and it should immigrate at higher levels to provide economic stimulus and jobs. It should target only the young. But, whilst it increases immigration it has to restructure the way the US does business. That is the interaction of business and government. Government has to stop the 'industrial social welfare' to the rich right and goofy socialist union left to protect unviable industry. If the US economy can achieve this it will be on a much better footing than the poor performance of the past 6-7 years. The US socialised industrial welfare model is what's killing the US middle class. The reality is while the US is not as competitive as it could be makes it easier for others to be more competitive.