Tax hike to accelerate auto sales in Japan by 8.7%

Consumers and firms will likely take advantage of lower vehicle prices this year.

Auto sales in Japan is expected to grow by 8.7% this year as consumers and firms take advantage of lower vehicle prices before a higher sales tax takes effect in 2019.

Prime Minister Shinzō Abe announced in June 2016 the increase of sales tax in Japan by two percentage points to 10%, effective in October 2019.

“We therefore expect households and businesses to take advantage of still favourable vehicle prices in advance of the tax hike, which will help prop up sales volumes in 2018 and into 2019 (before October's deadline),” said BMI Research.

“Beyond 2018, we forecast new vehicle sales in Japan to fall 4.1% in 2019 and contract at an annual average rate of 2.5% between 2019 and 2022. This will be due to a mix of weak demand because of higher tax rates on vehicle ownership as well as the country's weak economic growth outlook,” it added.

In Singapore, auto sales are also expected to slam the brakes as consumers turn to ride-sharing services. BMI Research forecasted the commercial and passenger vehicle registrations to decline by 20% and 6.5% respectively.