Japan auto demand to slump after sales tax hike, JAMA says

A rush of buying before an April 1 tax increase helped boost Japan's light-vehicle sales 15 percent from a year earlier in February, a sixth straight monthly increase.

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TOKYO (Bloomberg) -- Japanese auto deliveries will drop 16 percent in the year starting April 1 as a sales-tax increase damps demand, an industry group estimates.

Sales will probably fall to 4.75 million units in Japan, the world's third-largest auto market, as the levy rises to 8 percent from the current 5 percent, the Japan Automobile Manufacturers Association said in a statement today.

Japan's first sale tax increase in 17 years, intended to help repay debt, is expected to dent consumption from cars to televisions, posing a challenge to Prime Minister Shinzo Abe's ambition to spur growth.

A rush of buying before the April 1 increase helped boost vehicle sales 15 percent from a year earlier in February, a sixth straight monthly increase.

Japan plans to cut its vehicle-purchase tax to 3 percent from 5 percent to cushion the effect of the sales tax increase, and to abolish the purchase levy when the nation's sales tax is raised to 10 percent as planned for 2015.

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