January 1 , 2008

New Year's Message

Fujio Cho, Chairman

Best wishes to all for 2008, as the world enters a new year of hope and promise.

Two significant developments in 2007 were the steady rise in crude oil prices and, in the latter half of the year, the subprime mortgage crisis in the United States, which cast a pall of uncertainty over the U.S. economy and compounded the escalating weak dollar/strong yen trend. Yet despite these adverse conditions, exports and corporate capital investment remained strong amid sustained growth for the Japanese economy throughout the year.

Against that general backdrop, Japanese domestic demand for passenger cars and commercial vehicles in 2007 finished at 5.38 million units, down 6.2% compared to 2006 for the third straight year of decline. Motorcycle demand fell for the second consecutive year, down 2.0% from 2006 to 720,000 units. These figures attest to what continues to be a very sluggish motor vehicle market in Japan.

In contrast, production was bolstered by robust worldwide demand, with domestic-based output surpassing 10 million units for the sixth successive year. Overseas as well, increased globalization characterized by further moves to local production enabled Japanese automakers to build over 10 million vehicles for the third year in a row—a trend that is expected to remain steady for the time being.

While uncertainty hangs over the U.S. economy, continued growth is forecast in 2008 for China, India and other emerging economies. With hopes that the corporate sector’s strong performance will favorably impact personal consumption, a gentle recovery for the domestic economy overall should be maintained by these and other positive developments.

Taking all these factors into account, JAMA projects domestic passenger car and commercial vehicle demand in 2008 at 5.32 million units, and motorcycle demand at 700,000 units.

Because the automotive sector is one of the pillars of the Japanese economy, it is vitally important that our industry maintain a vigorously innovative approach to the challenges it confronts in the pursuit of continuous progress. Efforts now will focus chiefly on the domestic market, road safety and the environment, and globalization.

Energizing the domestic market is a priority issue for Japan’s automakers. Achieving recovery and sustainability in this regard will be a challenge of the first order. Towards that end, we will strive to supply products that satisfy the increasingly diversified needs of our customers through the incorporation of cutting-edge vehicle and telecommunications technologies, among other features. All-out efforts will be made to enable customers to enjoy the use of their vehicles to an unprecedented extent and to expand significantly the number of car enthusiasts nationwide.

To help ensure greater comfort and pleasure in vehicle use, JAMA will continue actively to promote mobility-enhancing measures such as road improvements, the implementation of Intelligent Transport Systems, expanded car and motorcycle parking availability, and the more widespread use of advanced assisted-mobility vehicles.

Having sponsored a petition, signed by 10.35 million citizens, opposing the allocation of road-designated tax revenue to the government’s general revenue pool, last year JAMA proposed ten specific measures to enhance Japan’s road infrastructure. We find it extremely disturbing that despite such initiatives, the government and ruling coalition have approved the allocation to general funds of road-designated tax revenue exceeding actual road appropriations and, moreover, have extended the “temporary” increases in road-related taxes for another 10 years. On a brighter note, the government’s decision also proposes studying coordinated strategies for the implementation of sweeping reforms to Japan’s overall tax structure. Encouraged by this move, JAMA will continue to advocate a simplification and reduction of auto-related taxes and to promote a better understanding on the part of the public of the issues involved.

As regards road safety, JAMA supports the government’s goal of making Japan’s roads the safest in the world. JAMA’s broad-ranging activities in this area are focused not only on advances in vehicle safety technologies, but also on promoting greater public awareness of road safety through the implementation of traffic safety campaigns and other educational initiatives.

Special emphasis will be placed on promoting rear seatbelt use in passenger cars and the correct wearing of motorcycle helmets, as well as on the prevention of drunk driving. JAMA will also conduct further research on optimally effective methods for improving skills awareness among elderly drivers.

Combating global warming remains the most urgent issue for JAMA in the area of environmental protection. With respect to Japan’s targets established under the Kyoto Protocol, research and development will be advanced to achieve greater automotive fuel efficiency. On the basis of cooperation and competition, efforts will also focus on the introduction of next-generation clean-energy vehicles emitting zero or only small amounts of CO2. In addition, JAMA will be actively contributing to the formulation of a post-Kyoto Protocol framework enabling a sustained, effective response to the issue of climate change.

This summer Japan will host the Hokkaido Lake Toya Summit of the Group of 8 industrialized democracies, tailored to reflect the keynote theme of an “environmental showcase.” JAMA will lend its support to this global conference with displays of automobiles featuring the very latest advances in environmental technology.

Improvements in the trade and investment sectors are crucial to the automobile industry, whose activities are conducted on an increasingly globalized scale. High hopes and expectations have been raised around the world by efforts to promote multilateral trade agreements under the World Trade Organization as well as bilateral economic partnership agreements and other similar accords between countries and regions. JAMA supports the Japanese government’s efforts on this front by mounting strong appeals to the relevant governments, industries and other stakeholders. As regards an economic partnership agreement with the European Union, Japan and the EU’s joint initiative in establishing a dedicated private-sector study group is widely anticipated to lead to the organization of intergovernmental conferences on this issue.

Meanwhile, counterfeit products and other intellectual property rights infringements have escalated into an increasingly serious problem of global concern. JAMA has taken action in this area through the experts committee it established for that purpose, and has also teamed up with the Japanese government and other concerned entities in implementing a number of specific related initiatives.

In 2008, with a greater sense of purpose than ever, we look forward to addressing the challenges I have described here. As always, I welcome this opportunity to express JAMA’s and my own thanks to our friends and colleagues all over the world for their continued support in the new year.