By on May 2, 2014

2014 Honda Freed Spike

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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14 Comments on “Japanese Auto Market Takes Sales Hit As Consumption Tax Increases...”

  • avatar

    Taxes reduce consumption: News at 11.

    In all seriousness, this shouldn’t surprise anyone. What always does make me chuckle, though, is when the same politicians and economists who recommend these schemes express their shock that the new taxes don’t accomplish what they originally intended.

  • avatar

    Japan’s government debt is out of control, I see a default looming as the old school bond buyers give way to younger investors not willing to buy government bonds out of some sence of patriotic duty.

    Its interesting that their quantative easing program, while reducing the value of the yen relative to the dollar, initially seemed like the jump start the economy needed but now their stock market has deflated, its current account deficit is basically break even and now with the increased consumption taxes coming on line, it seems like a perfect storm of bad news for Japan’s plan to grow its way out of its debt hole. A Japan default could be the next global financial crisis.

  • avatar

    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.

  • avatar

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

  • avatar

    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.

    • 0 avatar

      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.

  • avatar
    Jeff S

    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.

    • 0 avatar
      Big Al from Oz

      @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.

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