Amid the economic challenges that Japan’s continues to face, its government has decided to extend the duration of tax breaks for fuel-efficient vehicles to show its support for automakers. Last Saturday, the outline of tax policies approved by cabinet members in Tokyo indicated that instead of expiring in April 2012, the program will now expire in April 2015.
The rebates for eco-friendly vehicles had expired in September but Japan has decided for them to resume for a year. Even a few hours before the outline was completed, the tax cuts and rebates for the auto industry were still being debated by the government and the ruling Democratic Party of Japan.
According to Finance Minister Jun Azumi, the country has to support the "key industry" of automobiles before thinking about reducing taxes. He said that Japan would also need to find a way to cut back on the losses in revenue. Before the release, Christopher Richter, an analyst at CLSA Asia-Pacific Markets in Tokyo, said that Japan holds the title of having the biggest public debt in the world.
He added that failing to offer sufficient support to the auto industry would be a “critical issue” for the economy as a whole in the future. The documents also revealed that requests to further reduce the levies on vehicles were turned down by Prime Minister Yoshihiko Noda.
The Japanese government made the decision to reduce the car weight taxes by 150 billion yen ($1.9 billion) after the Trade Ministry requested around 1 trillion yen of levy cuts. Last Nov. 15, Toshiyuki Shiga, head of the Japan Automobile Manufacturers Association, said that it is asking not just to reduce the tax burden but also to fight the strong yen, as well as “prevent a hollowing out and maintain domestic production.” [source: Bloomberg]