Japan Time 02:05 14 Dec 2017
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Japan Car Sales Drop Narrows, Easing Sales Tax Hike Fears

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Japan automobile sales fell in May by less than the previous month suggesting concerns a tax increase would stymie consumer spending were overblown. Vehicle deliveries last month slipped 1.2 percent to 363,370, the Japan Automobile Dealers Association and Japan Mini Vehicle Association said today. The decline followed a 5.5 percent drop in April, the month after Japan raised its sales tax for the first time since 1997. Carmakers led by Toyota Motor Corp. (7203) entered this fiscal year bracing for a yearlong slump in the third-biggest car-buying nation, with the industryfs trade group forecasting a record 16 percent sales plunge. The narrower declines in the first two months of the fiscal year are a positive sign for Prime Minister Shinzo Abefs efforts to rein in the worldfs biggest debt burden without harming economic growth. gPeoplefs expectation for future income is not as bad as in 1997,h Masahiko Hashimoto, an economist at Daiwa Institute of Research Ltd., said by telephone. gThis kind of sentiment would have an impact on their consumption behavior.h Companiesf capital spending is adding to optimism that Asiafs second-largest economy will weather the first sales levy increase in 17 years. Expenditures climbed 7.4 percent in the first quarter from a year earlier, Japanfs finance ministry said today. Toyota, the nationfs largest listed company, last month said it planned 500 billion yen ($4.9 billion) in domestic spending for the fiscal year ending in March, a 4.6 percent increase from a year earlier. 1997 Comparison Fumihiko Ike, chairman of the Japan Automobile Manufacturers Association and Honda Motor Co. (7267), told reporters last month that the effect of Japanfs consumption tax would be less drastic than in 1997, when the levy was last raised and helped spur 21 consecutive months of declining domestic car sales. Japanfs automotive industry is being buoyed by demand for minicars, with sales climbing from a year earlier for 11 consecutive months. Deliveries of minicars rose 5.3 percent in May after a 2.9 percent rise in April, boosting domestic automakers including Toyota, Honda and Nissan Motor Co., which each made profit forecasts for this fiscal year that trailed analystsf estimates. gThings are not really as bad as people recently expected,h Koji Endo, a Tokyo-based analyst at Advanced Research Japan, said in an interview. gItfs very reasonable to expect a relatively soft market during the first six monthsh after the sales tax increased. Spending Drop The picture of how Abefs attempt to revive Japanfs economy is faring has been mixed. Household spending declined 4.6 percent in April from a year earlier, steeper than estimates by economists surveyed by Bloomberg News. Weak domestic demand is expected to drag on earnings at automakers such as Toyota, which reported record net income last fiscal year as a weaker yen boosted the value of overseas earnings. Toyota net income probably will slip 2.4 percent to 1.78 trillion yen this fiscal year, the carmaker reported last month, with Japan projected to be its only major region where vehicle sales may decline. Honda last month forecast its full-year profit may increase to 595 billion yen in the 12 months ending in March 2015, below analystsf estimates compiled by Bloomberg. Nissan Motor Co. (7201) projected net income will climb to 405 billion yen, also trailing analystsf estimates. To contact the reporters on this story: Craig Trudell in Tokyo at; Masatsugu Horie in Osaka at
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