Consumer tax hike caused vehicle sales to drop 5.5% in Japan

Article by Andrew Christian, on May 4, 2014

Vehicles sales in Japan dropped 5.5 percent to 345,226 units in April, according to the Japan Automobile Dealers Association and Japan Mini Vehicle Association. The drop was attributed to the start of the implementation of an increase in consumption tax, which was raised from 5 percent to 8 percent effective April 1, 2014.

Prior to that, auto sales in the country had surged seven months in a row. The decline could also indicate the extent of the consumer backlash over the higher taxes imposed to ease Japan’s debt burden. Economists expect Japan to experience its biggest economic contraction since the 2011 earthquake and tsunami.

Martin Schulz, an economist at Fujitsu Research Institute, told Bloomberg that “any sane person” would buy more expensive items in February or March rather than in April. Her noted that Japanese carmakers will have to prove “how much they really can work” their home market.

The decline in April may continue in May, poor weather prevented some customers from receiving their cars until April. This means that the industry sales figures in April were artificially high, according to Yoshitaka Hayashi, a director at the dealer association.

Hayashi added the figures could turn “very grave” starting May. The Japan Automobile Manufacturers Association is expecting vehicle deliveries to drop to an all-time high of 16-percent for the fiscal year ending March 2015.

For April 2014, Toyota Motor Corp. and Mazda Motor Corp. both sold their fewest number of vehicles since 2011 while Fuji Heavy Industries Ltd., posted a 41-percent drop in sales in the month. On the other hand, Nissan Motor Co., Honda Motor Co., Suzuki Motor Corp. and Mitsubishi Motors Corp. all posted sales hikes in April.

Topics: japan

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