TEMPO.CO, Tokyo - The Japanese government's policy on increasing sales tax from five percent to eight percent in April 2014, has affected the country’s automotive industry. The number of car sales recorded on July 2014 dropped by 9.1 percent to 333,471 units, which is the lowest number ever recorded since August 2011.
The sales tax increase, which was applied on April 2014, was the first time in the last 17 years. In 1997, the Japanese had increases sales tax from three percent to five percent following the country's economic recession.
The increase was the government's attempt to manage the increasing public debt ratio. However, the increase had also affected the consumer, investment, and capital expenditure sectors.
Data from Japan's Auto Dealers Association revealed that sales of small-sized city cars dropped by 15.1 percent to 126,865 units. Sales of other vehicle dropped by five percent to 206,606 units.
Sluggish domestic demand is expected to weigh on earnings at Japanese automakers including Toyota Motor Corp. Toyota's net income will probably fall by 2.4 percent to 1.78 trillion yen (US$17 billion) in this fiscal year.
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