Japan Auto Sales on a Downward Spiral

Japanese automobile sales experienced a dramatic fall in November, according to a report by the Japan Automobile Dealers Association. This is due to the ending in early September of a popular government subsidy that encouraged motorists to buy eco-friendly cars. The measure had boosted demand at the beginning of the global financial crisis, slowing its effects on the nation's economy.

Nationwide automobile sales, excluding 660cc minicars, fell 30.7 per cent in November to 203,246 vehicles. Toyota sales, excluding Lexus, fell 4.3 per cent, while Nissan Motor fell 21.3 per cent. Honda experienced a dramatic 37.6 per cent decrease.

Total Japan domestic market auto sales experienced a year-on-year decrease for the third consecutive month (since September 2010).

"Sales fell in response to the end (in early September) of subsidies for environment-friendly cars," said an official of the Japan Automobile Dealers Association.

"There is no doubt that demand had risen in advance of the subsidy's expiration," he said, adding it was difficult to predict when sales would pick up.

The ending of the scheme caused Japanese automakers great difficulties in coping with a strong yen against other major currencies, and forced them to reduce production. A strong yen reduces exporting automakers' incomes when repatriated, while making their products more expensive and less competitive in foreign markets. The Yen was in sight of its postwar high against the dollar recently, crippling Japanese income from exports to the North American market. In the end, Japan may simply have to learn to live with a stronger yen.