Japanese Auto Industry, Economy In Danger Of Hollowing Out

Cameron Aubernon
by Cameron Aubernon

Just like the player character after dying several times in the “Dark Souls” series, Japan may find itself hollowing out as a result of the country’s declining auto market.

Bloomberg reports 333,471 deliveries were made in August, the fewest since the same month in 2011, with sales of kei cars leading the way down at a decline of 15 percent after cushioning demand for the past few months; the overall decline for August 2014 was 9.1 percent.

The decline may only be the beginning, however, according to analysts at IHS Automotive, Advanced Research Japan and Barclays Plc. Despite a weakened yen, recent increases in Japan’s consumption tax knocked down demand for new vehicles. In turn, automakers are keeping annual production at low levels for the local market, while capital expenditure will fall 7.9 percent for FY 2014, 1.3 percent in FY 2015.

Should the trend continue, the Japanese economy as a whole could follow the automotive industry into a hollowed out new “lost decade,” undoing Prime Minister Shinzo Abe’s attempts to revive it, such as the aforementioned weakening of the yen. Production is predicted to decline by 1.6 million units in the coming decade while global production climbs to 22 million by 2021, according to IHS Automotive.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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14 of 47 comments
  • Jacob_coulter Jacob_coulter on Sep 03, 2014

    I'm sure their current gamble of printing their way into prosperity will fix everything. Their debt versus GDP is over 230%, the highest in the developed world Japan is going to have far more problems than the auto industry when there's a currency crisis. You can't print wealth, otherwise every country would be wealthy and prosperous. But every country thinks they can outsmart basic common sense with some technocrat pulling the right switches.

  • Sportyaccordy Sportyaccordy on Sep 03, 2014

    Japan's problems are way bigger than consumption taxes. Govt could (and in the past, judging by their debts, essentially HAS) GIVE people money to spend, and it wouldn't solve their problems. It's only going to get worse. Japan's population is shrinking, and they don't have a low enough cultural inertia, demand for immigrants, or money to change that.

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    • VoGo VoGo on Sep 03, 2014

      @challenger2012 I don't think you can legally drive a GT-R without insurance...

  • Petezeiss Petezeiss on Sep 03, 2014

    TTBOMK, Japan is the only former imperial power with the sense to not import the people it once oppressed and exploited. That leaves its decks unencumbered by an ever growing, truculent and parasitic underclass to support. Whatever they come up with, be it a careful increase and acculturation of immigrants or a crash program of producing robotic coolies, they won't have to divert grotesque amounts of their budget to just keeping the riots and diseases at bay.

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    • Challenger2012 Challenger2012 on Sep 04, 2014

      @JD-Shifty WTF?

  • Ccode81 Ccode81 on Sep 04, 2014

    As working in financial market industry, logically I should take these figures seriously. However watching the roads on Tokyo, emotionally I wonder if those relatively new and neat cars packing the street has to be renewed any faster.. More and more average people here taking cars as appliance and changing mind to keep current one until it breaks. And they rarely break down to death with shortening driving distance and every 2 year mandatory inspection. Isn't, it becoming old fashion to measure wealth by the amount of the steel we are consuming year on year? My nation with one of longest life expectancy, if population is aging, the problem is just about allowing retire too early, I think. Most government dept is borrowed from domestic investors such as pension and insurance, banks, and notional payment going back to the Japanese at seriously low interest rate. Some capital which not absorbed in domestic markets goes abroad and we lend 325 trillion yen to rest of the world. Being biggest lender for 23 consecutive years. And when we die one day, government is going to charge enormous inherit tax to what we leave. Some will say shrinking sales hurts manufacturing industry, but 70% of GDP generated by service industry these days. A very classic economy model of reduce spending,save money and earn return from lending, seems to be working to my eyes.