Japan
Automobile
Manufacturers
Association, Inc.

Issue No. 2, 2009

Japanese government support for the automotive sector

In response to the economic downturn, the Japanese government has been implementing a wide range of emergency economic measures, including employment measures, support measures for SMEs (small and medium enterprises), low-carbon measures, and measures aimed at local revitalisation .
As a part of these efforts, the Japanese government has taken action to support the auto sector through tax incentive measures.  In addition, eco-friendly vehicle purchasing promotion measures are now under parliamentary review prior to final approval.

Tax incentives now in effect for new vehicle purchases

As of April 1, 2009, tax reductions came into effect in Japan on the automobile acquisition tax (imposed only at the time of purchase) and tonnage tax (imposed once yearly for the first three years) for the purchase of new vehicles meeting stipulated fuel efficiency and emissions criteria. 
Next-generation vehicles, including electric and hybrid vehicles, are effectively exempt from these two taxes, which translates into a tax reduction per vehicle of roughly 150,000 yen, or about 1,125 euros*.

Vehicles targeted

Corresponding tax reduction rate

Next-generation vehicles (electric vehicles, hybrid vehicles, etc.)

In effect, exempt from both taxes

Passenger cars, including mini-vehicles

Vehicles meeting 2010 fuel efficiency standards +25%

Emissions down by 75% from 2005 standards

75% reduction

Vehicles meeting 2010 fuel efficiency standards +15%

50% reduction

Japan’s new economic stimulus package

The Japanese government has, furthermore, agreed to a new stimulus package worth a record 56.8 trillion yen (427 billion euros).  As announced by Prime Minister Taro Aso, this set of “Countermeasures to Address the Economic Crisis” is expected to drive up the country’s GDP by around 2 percentage points in fiscal 2009 and create 400,000 to 500,000 new jobs.

The package, approved in a Cabinet meeting on 27 April, still needs the parliament’s endorsement, which is expected in late May or June at the earliest.  It incorporates a number of new economic measures, including incentives for the purchase of new eco-friendly vehicles (whether scrapping an older vehicle or not) representing a total budgetary allocation by the government of about 370 billion yen (2.78 billion euros).

▶ Vehicle replacement incentives in the new stimulus package

The scope of the vehicle replacement scheme targets purchases of new passenger cars (including mini-vehicles) and heavy-duty vehicles, provided some specific criteria are met.

For passenger cars and mini-vehicles:

For heavy-duty vehicles:

▶ Subsidies for new vehicle purchases in the new stimulus package

The government’s new stimulus package also includes incentives for the purchase of environmentally friendly vehicles, with no vehicle scrapping requirement, as follows:

For passenger cars and mini-vehicles:

For heavy-duty vehicles:

These vehicle replacement and purchasing incentives—to be applied retroactively to April 10, 2009 and through March 31, 2010—are expected to result in sales of approximately 690,000 new vehicles, and have ripple effects in employment creation for some 90,000 persons.  Combined with the tax reductions for new vehicle purchases in effect as of April this year, about 120,000 jobs are expected to be created. 

JAMA welcomes the government’s initiatives and is particularly pleased with the inclusion in the new stimulus package of subsidies intended to promote sales of eco-friendly cars.  JAMA Chairman Satoshi Aoki has stated that these combined measures “will help accelerate the shift towards a low-carbon society in addition to spurring a recovery in slumping auto sales”, pointing out that Japan’s vehicle manufacturers “will continue to make every possible effort to support job preservation and renewed growth in the industry.”

 

*Currency conversion rate: EUR 1 = JPY 133.16