Increased Sales Tax in Japan will Drop Auto Demand

Japan has increased its sales tax for the first time in 17 years, which will greatly affect auto production.

Japanese auto deliveries will drop 16 percent in the year starting April 1 as a sales-tax increase damps demand, an industry group estimates.

Sales will probably fall to 4.75 million units in Japan, the world’s third-largest auto market, as the levy rises to 8 percent from the current 5 percent, the Japan Automobile Manufacturers Association said in a statement today.

Japan’s first sale tax increase in 17 years, intended to help repay debt, is expected to dent consumption from cars to televisions, posing a challenge to Prime Minister Shinzo Abe’s ambition to spur growth.

A rush of buying before the April 1 increase helped boost vehicle sales 15 percent from a year earlier in February, a sixth straight monthly increase.

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