Japan extends green auto tax breaks for three years

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West area of Ikebukuro station, Tokyo, Japan. Toyota Prius Hybrid as a taxi.

Government tax incentives on fuel-efficient vehicles have been extended in Japan. (Photo Credit: CC BY/midorisyu/Flickr)

Green vehicles have proven to be popular with Japanese consumers. The ruling Democratic Party of Japan knows this. Thus, despite having the largest public debt of any nation, Automotive News reports that Japan has decided to extend government tax incentives for green vehicle ownership for another three years.

Showing support for Japan’s automakers

The calamitous combination of a stronger yen and a weakness in global demand for Japanese vehicles has slowed the nation’s economic recovery to the point that the government decided that extending tax rebates was necessary.

Among automakers, luminaries like Toyota Motor Corp. have cut profit forecasts by more than 50 percent because of production disruptions caused by flooding in Thailand.

“A slowdown in Japan’s economic growth is unavoidable for now,” said Bank of Japan Deputy Governor Kiyohiko Nishimura.

A three-year tax incentive extension

Saturday, Democratic Party cabinet members decided that Japanese green auto tax breaks will not expire in April 2012 and will extend until April 2015. One-year rebates for green cars, which had expired in September, will also resume.

Japanese Finance Minister Jun Azumi recognized the imminent need to strengthen a key Japanese industry, despite some misgivings over wholesale tax cuts. Similarly, Prime Minister Yoshihiko Noda rejected cabinet requests for additional tax levies on automobiles.

The cabinet’s final decision reflected a change in vehicle weight taxation by $1.9 billion, a far cry from the $12.9 trillion barrage of levy cuts requested by Japan’s Trade Ministry.

Economy depends on auto industry

Analyst Christopher Richter of CLSA Asia-Pacific Markets in Tokyo noted that failure to provide enough support for the nation’s automotive industry would “be a critical issue for the economy as a whole in the future.”

Automakers all but cried out for governmental assistance.

“Our request isn’t only to reduce the tax burden, but it’s to combat the strong yen, prevent a hollowing out and maintain domestic production,” said Japan Automobile Manufacturers Association chair Toshiyuki Shiga on Nov. 15.

Gross domestic product on the rise

Despite the difficulties, Japan’s gross domestic product over the three-month period that ended Sept. 30 increased at an annualized 5.6 percent. According to the Cabinet Office, this fell short of the 6 percent that had been predicted as a median figure by a panel of 19 economists interviewed by Bloomberg.

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Automotive News

BBC News

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