TOKYO -- It's the top headache plaguing Japan's automakers in their own back yard: The Japanese keep buying fewer cars.
A big reason is Japan's population is not only aging; it's shrinking. In 2012 the population declined by 212,000 people, the largest annual drop since record keeping began in 1899, except for the World War II years. It was the sixth straight year of decline.
And the graying of Japan has been relentless. Today 23 percent of Japan's population -- almost one person in four -- is 65 or older, compared with less than 10 percent just after World War II.
"With Japan's population shrinking and aging, automobile demand is in a structural downtrend," says Kohei Takahashi, an auto analyst at J.P. Morgan in Tokyo. "There will be no change in the trend of Japanese auto and auto parts makers scaling back production in Japan and expanding production overseas."
Rapid urbanization also undercuts demand because Japan's cities are honeycombed with top-notch public transportation. As jobs evaporate in the countryside and young people move to the cities, more find that it's often better not to have a car.
"In the city, after you buy a car you still face lots of additional car-related expenses. So a lot of people are saying they don't need that in their life," says Akio Toyoda, the car-guy president of Toyota Motor Corp. who also is chairman of the Japan Automobile Manufacturers Association.
Then there are Japan's onerous auto taxes, aimed at generating critical revenue for a debt-laden government as well as combating pollution. The prospective owner of a Toyota Corolla, for instance, has to pony up a 5 percent auto acquisition tax, a 5 percent sales tax, a tonnage tax based on vehicle weight and an annual automobile tax based on engine displacement.
The manufacturers association reckons that auto taxes in Japan are about 50 times the amount paid by U.S. drivers and around four times the amount charged in Britain and Germany.
The heavy taxes discourage car buying and are a particularly harsh burden for young people, who don't have the stable employment prospects or the disposable income of their forerunners because of Japan's 20-year economic slump.
A large chunk of a whole demographic has been shunted from the corporate career track to scratch out a living in the margins of the service sector at convenience stores, restaurants and temporary agencies. These 20- and 30-somethings are known as furi-ta in Japanese, a term derived from the English words "free-timer," for all the time they have on their hands as a result of not working.
Car ownership, for them, is in many cases an impossible stretch.