Auto Sales in Japan Could Drop 20%

Japanese vehicle sales soared 54% year over year to 2.95 million unit in the first seven months of this year. But analysts tell Bloomberg News that volume could tumble as much as 20% year over year in the October-December quarter after government subsidies expire.

The Japan Automobile Manufacturers Assn. has predicted demand will decline 10% in coming months.

Consumers have claimed all but 12% of the 300 billion ($3.8 billion) the government allocated last December to encourage the sale of energy-efficient vehicles, Bloomberg notes. The portion of the program budgeted for commercial vehicles was exhausted in early July.

Carmakers are calling on Tokyo to extend the subsidies. They hope to avoid a repeat of September 2010, when vehicles sales plunged 29% after a previous round of incentives ended.

In the longer term, analysts predict, Japan's plan to hike the national sales tax from 5% now to 8% in 2014 and 10% in 2016 would further dampen demand.