The Japanese government has proposed throwing a lifeline to its auto industry by reinstating a cash-for-clunkers program that successfully boosted sales in 2009-10.
It remains to be seen whether U.S.-brand vehicles will be shut out of the new program, as they were before.
Japan's government will allocate ¥300 billion ($3.85 billion) for the auto incentives as part of a fourth post-earthquake budget, according to the trade ministry. The subsidies will apply to fuel-efficient vehicles if the supplementary budget is passed. Japan also recently trimmed a tax on new-car purchases and proposed a three-year extension of a series of tax breaks on purchases of fuel-efficient vehicles.
If the budget goes through, Japan's auto sales could grow by about 900,000 units in 2012 after an estimated 14 percent drop this year to about 4.25 million units, said Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association.
"We expect car sales to grow at the 2009 pace, when tax cuts and subsidies were introduced," Shiga said. The association didn't give a total sales forecast for next year.
Japan's 2009-10 cash-for-clunkers plan paid ¥250,000 ($3,209 at the current exchange rate) to buyers who traded in cars that were at least 13 years old for vehicles that met Japan's 2010 emissions standards.
U.S.-brand vehicles were barred from the previous incentives because the vehicles weren't tested and proved to meet or beat Japan's 2010 fuel economy standards.
They aren't tested because of an irony in Japan's market-opening measures. Years ago, in a tacit acknowledgement of how out of sync with world standards Japan's fuel economy tests are, Japanese authorities permitted foreign vehicles to be sold in Japan without having to be retested under the Japanese standards, provided the vehicles met their home countries' emissions tests. The idea was to dismantle a clear nontariff barrier to imports of foreign-built cars.
It's not clear yet what standard vehicles will have to meet to qualify for the reinstated incentives. But U.S. trade officials should let Tokyo know now that the rules should be written so as to allow U.S.-brand fuel-efficient vehicles to qualify for the subsidy.
Japan will resist. The program's real purpose, after all, is not to serve the environment. It's to boost sales by Japanese automakers hit hard by the March 11 Japan earthquake and the flooding in Thailand.
But the United States should stick to its guns. After all, Japanese automakers sold 319,342 vehicles under the U.S. cash-for-clunkers program in 2009, almost half of the roughly 677,000 vehicles purchased. About 115,000 of those Japanese vehicles were imported, or 17 percent of the total.
It's highly unlikely that imports into Japan by U.S. automakers will account for 17 percent of the vehicles sold under the reinstated Japanese program. But it's only fair that U.S. automakers should be allowed to participate.