Japan car sales hit lowest point since 2011 image

The auto sales in Japan have reached a three-year low last month, showing a decline in consumers’ spending on car purchases following a sales-tax increase.

Vehicle sales went down 9.1% from 2013, with 333,471 units sold, the lowest since August 2011. The situation occurred after sales rose for seven months in a row before the tax increase in April.

Household spending dipped 5.9% in July this year, showing a weakness in Japan’s economy. Further declines would go against Prime Minister Shinzo Abe’s efforts to resuscitate the economy after the earthquake and tsunami that ravaged the northeast part of the country three years ago.

Deliveries of minicars fell 15.1% to 126,865 vehicles, while sales of other cars were 5% lower at 206,606 units. Abe’s government raised in April the consumption tax from 5% to 8% in efforts to counter the country’s national debt.

Japan’s domestic auto sales fell for 21 straight months last time the consumption tax was raised in 1997. Chairman of the Japan Automobile Manufacturers Association, Fumihiko Ike, said in May that this year’s tax increase may have though a smaller effect.

The problematic domestic demand is expected to weigh on earnings of the Japanese automakers, Toyota included, which reported record profit last year as a weaker yen boosted the value of its overseas earnings. Toyota’s income will probably slide 2.4% to $17 billion this fiscal year as the carmaker stated in May, projecting Japan to be the only major market where the car sales might decline.

By Gabriela Florea