Imported Automobile Market of Japan

Resumption of Imported Automobile Sales

After World War II, automobile import resumed in 1948 under the foreign currency allocation system. However, at that time, because only automobiles for special uses such as ambulances, and vehicles for the media and tourists were allowed to be imported, most of foreign automobiles on street then were those disposed of by the American military.

Furthermore, to accelerate the economic recovery, the government stipulated that only vehicles manufactured in Japan could be procured for official use. The emphasis was on promoting export while restricting import. As a result, imported automobile owners were virtually limited to a small number of wealthy and privileged people.

Imported Automobile Market Shaken by Boom and Bust

With elimination of the foreign currency allocation system in October 1965, finished car import was liberalized and the imported automobile market began to expand.

Imported automobile sales since 1966 increased from the level of 10,000units（which had been maintained since 1964）to 20,000 in 1972 and then to 30,000 in the following year. Despite the impact of the first oil crisis, the sales reached 40,000 vehicles in 1975 and peaked temporarily at 60,000 in 1979.

Factors facilitating the imported automobile sales at that time included elimination of customs duties in 1978 and appreciation of the yen against foreign currencies. However, as a result of the second oil crisis, the economy suffered from a downturn in 1980, global concern grew about an energy shortage and the dollar appreciated sharply. These factors, combined with the product quality problems of the US-made automobiles, pushed the market back down to the 40,000－unit level.

American automobiles in particular suffered from severe setbacks–the demand fell to one－tenth of the peak. As a result, many importers withdrew from the market.

From 1980, the downturn in imported automobile sales became chronic. For four consecutive years until 1984, sales were lower than the preceding year. The market hit the bottom in 1983 with sales shrinking to 35,286 vehicles.

Imported Automobile Market Enjoys Dramatic Expansion

After the severe setback, the imported automobile market finally began to recover in 1984 when sales returned to the 40,000－unit level. Furthermore, as Japanese trade imbalances with the United States and Europe were increasingly causing international frictions, and the “Action　Program to Promote Import” was announced by the government in 1985, which was designed to turn around imported automobile sales and marked the beginning of a new era for the imported automobiles.

Following the Action Program, imported automobile sales leaped forward, reaching 50,172 vehicles in 1985, 68,357 in 1986, 97,750 in 1987, 133,583 in 1988, 180,424 in 1989, and 221,706 in 1990.

Many factors contributed to the growth including government efforts based on the action plan to eliminate　”non－tariff barriers” by reforming the standards, certification　procedures, and automobile-related tax systems. Other factors included aggressive efforts by foreign automobile manufacturers to enter the Japanese market, lower prices and interest rates on automobile loans, the expansion of sales networks, and the participation of domestic automobile manufacturers in the importing business（i.e., import of overseas manufacturers’ products as well as their own foreign－built models）.

Changing Market Environment: First Drop in Sales in Eight Years

1990 was a watershed year for the imported automobile market, which had grown rapidly due to the reasons mentioned above. The changes in the market included depreciation of the yen, the rising official discount rates, and the Persian Gulf Crisis.

As a result, imported automobile prices and automobile loan interest rates rose. Furthermore, the Japanese economy seemed to head for a slowdown as stock and land prices continued to slide. Such situations put an end to the second longest economic boom since the end of World War II. This was a collapse of the so-called bubble economy. Other factors also contributed to the slowdown in automobile sales such as the revising and strengthening of the Garage Act in 1991, shortage of parking places, and their soaring fees.

These external factors had a profound influence on imported automobile sales, and 1991 marked an end of the sustained growth, which had begun in 1984. In 1992, the sales fell again for negative growth recorded for two years consecutively.

Imported Automobile Market Facing New Challenges

Under these circumstances, the friction caused by the international trade imbalance with the emphasis on the auto sector became serious again, and the need to increase import was further emphasized. During 1992 and 1993, the government embarked on a new program to support automobile import addressing the alleged discriminatory practices against imports and stepping up import-promoting measures.

In 1993, appreciation in the yen’s value resulted in lower imported automobile prices, and together with the promotion of imports, induced Japanese automobile makers to boost foreign production for import to Japanese. Also conducive to stronger sales were low-interest auto loans and other promotional campaigns as well as expanded sales networks, where more domestic dealers started to sell imported automobiles. All of these contributed to a recovery to year-on-year growth for the first time in three years.

Imported automobile sales accelerated further in 1994. The total sales of the year were higher than the previous peak in 1990 breaking the 300,000 unit milestone for the first time. In 1995, total sales rose to approximately 390,000 vehicles and the imported passenger car sales occupied an unprecedented market share of over 10 percent.

The up-trend continued until 1996 when the total sales surpassed 400,000 units and hit a new record for three consecutive years.

From 1997, however, due to an increase in the consumption tax rate, the suspension of special income tax cuts, and financial uneasiness, consumer spending stayed stagnant. The import of automobiles produced overseas by Japanese makers was partially suspended, and higher prices for some imported vehicles stemmed from the weak yen standing on foreign exchange markets. For two consecutive years, sales were below the previous year’s results.

The sales in 1999 slightly increased over 1998, but afterwards, the market has remained stable（270,000-280,000）until 2004.

50 Years of JAIA

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Imported Automobile Market of Japan

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