Before April, Japan’s new car sales grew for seven straight months, but since last month Asia’s second-largest auto market had a tax hike, vehicle deliveries fell to their lowest since December 2012.

The Japanese government grew the consumption tax from 3 to 8% for the first time in 17 years, as Prime Minister Shinzo Abe begins imposing higher taxes to try and balance what is the world’s biggest debt burden. Ultimately, expecting a huge consumer backlash, forecasters and analysts expect the quarter to see Japan’s highest economic drop since three years ago when the earthquake and ensuing tsunami ravaged the country.

Any sane person was buying big-ticket items in February or March rather than in April,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “The Japanese carmakers will have to prove how much they really can work this very difficult market.”

“There may be a temporary hangover,” said Kevin Tynan, an auto analyst at Bloomberg Industries in Skillman, New Jersey. “Japanese automakers production and earnings are at risk.”

Data from the Japan Automobile Dealers Association and Japan Mini Vehicle Association show that total unit sales last month dropped 5.5 % to 345,226 cars. The Automobile Manufacturers Association is also forecasting a 16% decline for the period ending in March 2015.

Via Bloomberg


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